Ear to the Ground

05 July 2024

In the UK there has been one focus only this week and that is on the General Election.  The result is now in and is very much in line with expectations, with perhaps the biggest surprises being in Scotland where the SNP had a poor showing and the Reform party perhaps taking more seats than expected.  Investment markets don’t like surprises and given that there was no major one, UK markets have reacted calmly on the back of the result, including sterling. 

A large part of the Labour party election agenda was focussed on economic stability.  They were also very cognisant of the high levels of debt and high debt to gross domestic product (GDP) levels.  As a consequence of that the Labour party manifesto was relatively modest, undoubtedly fiscally constrained.  The delivery of higher growth productivity, along with interest rate cuts providing some fiscal headroom for the incoming government, provided by likely interest rate cuts from the Bank of England, are likely to prove key to the Labour party’s delivery of their promises.

This, coupled with the sizeable majority which the election was won with, can perhaps mean that the UK can now be seen as a more stable market in which to invest, in particular by overseas investors.  The UK equity market as a whole remains one of the most lowly valued developed markets.  We have already seen a meaningful level of merger and acquisition activity in the UK, along with companies buying their own shares back, ultimately leading to de-equitisation.  A hint of political stability may just mean that investors are now more willing to join a company’s register as a shareholder.

In the US it was non-farm payroll week.  Here we saw a further 206,000 jobs added in June, which was slightly more than expected.  This went a little way to alleviate growth concerns following the release of weaker than expected manufacturing and service sector figures earlier in the week.  The ISM Manufacturing Purchasing Managers Index (PMI), along with the Services PMI, came in with a reading of less than 50 and below what was forecast.  By way of recap, a figure below 50 implies contraction of activity within the sector.  Whilst the manufacturing sector has posted contraction frequently over the last 12 months, this came as something of a shock for the service sector.

This article is for information purposes only and should not be construed as advice. We strongly suggest you seek independent financial advice prior to taking any course of action.

The value of this investment can fall as well as rise and investors may get back less than they originally invested. Past performance is not necessarily a guide to future performance. The Fund is suitable for investors who are seeking to achieve long term capital growth.

The tax treatment of investments depends on the individual circumstances of each client and may be subject to change in the future. The above is in relation to a UK domiciled investor only and would be different for those domiciled outside the UK. We strongly suggest you seek independent tax advice prior to taking any course of action.

Sign up today!

To receive notifications on new market insights published to our blog, please complete the below form.

You can unsubscribe at any time by emailing enquiry@lowes.co.uk or by clicking the ‘unsubscribe’ link at the bottom of each email.

Full details of how we use and secure your personal information and how to update your marketing preferences can be viewed in our Privacy Policy