Thursday’s general election will put pressure on the pound, weaken UK-focused stocks and subject capital markets to significant volatility, a leading financial advisory service has warned.
The comments come as the gap between the Conservatives and Labour continues to narrow, despite an expected landslide win for the Tories at the beginning of the campaign. The latest poll from YouGov has the Conservative lead at just four points over Labour, while ICM has it standing at 11 points.
According to Tom Elliott, deVere Group’s International Investment Strategist, the most likely scenario is the Conservatives having a majority of below 60. Should this happen, Elliot said:
“Sterling would wobble, and would fall sharply if that majority is below 40 and Theresa May is again beholden to the hard Brexit lobby of Tory MPs. FTSE 100 would rally as sterling falls, UK-focused stocks weaken and gilt prices would rise (and yields fall) in anticipation of a weaker economy.”
“A Conservative majority of over 60 – from the current 17 – I believe has a 25 per cent chance of occurring. Such a majority would vindicate her decision to call an election, and give her a large enough majority to effectively ignore the estimated 30 or so conservative MPs who want as hard a Brexit as possible. Sterling would rally as the prospect of Mrs May doing a soft Brexit deal rises, short term gilts would fall in price (and yields rise) as the prospect for the economy improves.”
Elliot concludes: “There are a few certainties in this election, but one thing we almost know for sure is that turbulence in financial markets is likely to intensify in the short-term as Britain readjusts.”