09/06/2017
What does the election results mean to you?
The results are in and we now know it is a hung parliament.
This essentially means no party has managed to gain a majority in seat numbers. This happened back in 2010 and at that point The Liberal Democrats formed a coalition with the Conservatives.
There are a number of things that could happen:
The Conservatives could form another coalition. If this does happen it is expected that it will not be with the Liberal’s, instead it is likely to be with the Democratic Unionist Party.
Labour may try to gain a majority by forming a coalition. However, they would need at least the Scottish National Party and the Liberals to do this (if not the other seats as well!).
Either could govern as a minority government. This would make things trickier with getting laws passed, as they would be relying on the support of smaller parties.
The next 2 weeks will be interesting to see how this plays out.
Things are complicated more than usual because of BREXIT and the more stable the government, the easier it will be to negotiate a trade deal.
So how have the markets reacted? And what does it mean for investments?
The Pound has fallen in value because of the hung parliament. This can be very beneficial to investments as it makes our exports and investing into the UK cheaper and therefore stimulates money into the UK. You may feel it in your pockets through imports (such as your food bill).
The markets have been very muted on the news of the hung parliament and actually increased 1% overnight due to the Pound falling in value.
The key to investing at this point is ‘diversity’ (not putting all your eggs in one basket). When managing investments, we always consider:
How long you wish to hold the investment for
The objectives you have. Are you growing the capital, or do you want to take an income?
The risk you are prepared to take on the capital
How much short-term volatility you are happy with?
The current state of world markets and economies
Having a diversified portfolio will be key in the coming months and years ahead. By spreading your capital will mean you are building in protection against isolated events to one market.
The results of the election and the effects to markets are as we expected and we will continue to manage funds with the eye on reducing volatility and producing longer term growth.
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