Clear blue water
Markets surge as Conservatives secure surprise general election victory, says Trevor Green
- Shock win for the conservatives triggers a surge in UK equities, bonds and sterling.
- In the short term we expect investors to refocus on prospects for the domestic economy.
- Bouts of market volatility are likely as US and UK interest rate rises near.
UK equities, bonds and sterling rose sharply as the Conservative Party won the general election. This took political pundits and financial markets, which had been expecting another hung parliament, by surprise. Shares in gaming companies, housebuilders and banks were among the biggest winners, as the threat of regulatory or other major changes from an incoming Labour administration evaporated.
Now the general election is out of the way, we expect investors to refocus on the domestic economy’s prospects. Improving jobs data, company earnings and consumer spending numbers all point to decent economic growth in 2015 and so support the near-term outlook for the asset class.
UK equities should also be supported by the reasonably positive outlook for the global economy. Despite some soft data in the US earlier in the year, we expect its economy to strengthen in 2015. Inflation is likely to remain low in the ‘developed’ world, and last year’s collapse in oil prices should support economic growth in most countries by boosting consumers’ spending power. That in turn should feed through into higher company profits. However, bouts of volatility are likely in coming months in the run up to higher interest rates in the US and UK.
Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (“Aviva Investors”) as at 1 May 2015. Unless stated otherwise any opinions expressed are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested.
Issued by Aviva Investors Global Services Limited, registered in England No. 1151805. Registered Office: St. Helen’s, 1 Undershaft, London EC3P 3DQ. Authorised and regulated by the Financial Conduct Authority and a member of the Investment Association. Contact us at Aviva Investors Global Services Limited, St. Helen’s, 1 Undershaft, London EC3P 3DQ. Telephone calls to Aviva Investors may be recorded for training or monitoring purposes.