PA ANALYSIS: Where should you invest after UK election shock?

Added 9th June 2017

The thesaurus doesn’t offer a decent alternative to “uncertainty”, the post-election word du jour, yet Theresa May’s dire performance makes it likely we will be reading the word many times a day for the foreseeable future.

PA ANALYSIS: Where should you invest after UK election shock?

Markets hate uncertainty, but so far the internationally focused FTSE 100 has responded reasonably well to the inherently difficult matter of a hung parliament, rising again by the end of Friday.

For investors, the question during these uncertain times is where to put their money - where will offer the returns for clients?

While sterling fell 2% on the election result, Aegon investment director Nick Dixon recognised that the election result did not mean equities were a lost cause.

“In the short term, a hung parliament brings political uncertainty, which will hurt sterling and UK-focused assets, but simultaneously create bright spots for internationally focused FTSE large caps that generate earnings in dollars and euros,” he said.

AJ Bell’s investment director Russ Mould added a softer Brexit, forced by a coalition government, could play out well for banks and financial stocks.

Despite Legg Mason’s European equities portfolio manager Michael Browne labelling the post-election UK as a “quiet backwater, of less relevance to international investors”, others have still managed to find glimmers of hope.

Even Browne concedes there are positive signs for housebuilders, for example, with Miton’s multi-asset manager David Jane admitting to a “small holding” in property.

While the UK looks less compelling overall to Jane, in house-building the “background for volume remains favourable” and consumer services areas such as pubs and restaurants also look promising to him.

Wellian Investment Management’s CIO Richard Philbin viewed the opportunity in property in a different way, with the initial opportunity in exporting companies, but the chance of a soft Brexit being “perversely” good news.

He said: “The result might mean the UK has a soft Brexit, so companies might not move as many offices overseas, so that could be a positive.”

The trappings of a minority government, and its inability to get very much at all done, could even take the regulatory heat off some companies, freeing them to “plough their own fields”, Philbin added.

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Louise Hill

Senior Reporter

Louise joined Portfolio Adviser in December 2016 as one of the editorial team’s news reporters based in London. Originally from Liverpool, she is an NCTJ-qualified journalist and began her career in 2014 working on local newspapers.

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