What does the change in UK political leadership mean for your investment portfolio?

UK Market Outlook in the face of political change

The immediate impact of Boris Johnson’s resignation, in the days that followed was minimal; the UK stock market has been muted, with a slightly positive skew on the Pound, as the uncertainty around his leadership and future became understood.

Boris Johnson’s resignation appeared to stem the growing political unrest caused by multiple resignations of key cabinet ministers in the preceding days. He has now taken up a “caretaker” position until a new leader is appointed.

It is important to note that, in addition to political factors, the UK stock markets are also influenced by other macro factors such as changes in commodity prices, the tightening of financial conditions by central banks, the rising inflation across global economies and the ongoing war in Ukraine. As such, it’s important not to look at the changing UK political landscape in isolation.

It is also of note that the top one hundred most capitalised companies in the UK, named theFTSE100, generate revenues across multiple geographies. These international income streams help to shield their performance from factors which are UK-based.

How historic leadership battles impacted the UK stock market

Reflecting on the last change in leadership, in 2019, Theresa May stepped down as Prime Minister and was replaced by Boris Johnson within two months. The market performance at the time was also muted, in a pattern similar to what we are experiencing now. This would suggest that UK stock markets are more heavily influenced by the macro factors discussed above and the wider economy than changes on the political landscape.

A new be announced on 5th September, and learning from past history, we do not anticipate any major change in market conditions when that happens. As ever, it is important to remain vigilant of both UK and global markets and continue adaptive to circumstances as and when they change.

In conclusion, whilst it is important to recognise the inherent political uncertainty might be unsettling for investors, a portfolio that is properly diversified both globally and by asset class will go some way to protecting investors from localised, short-term political uncertainty.

Nothing in this article should be construed as financial advice. Your capital is at risk. The value of your investments could go down as well as up and you may not receive back the full amount you invest.