UK General Election 2024: what will happen to stock markets?

Will share prices rise or fall in the run-up to polling day on July 4?

The UK General Election countdown has begun. Prime Minister Rishi Sunak announced the country would go to the polls on Thursday, July 4, 2024.

But what will happen to the stock market over the coming weeks? Will the battle for Number 10 give shares a boost or should we strap in for a volatile ride?

Here we look at the run-up to past UK General Elections to see whether these periods have traditionally been good or bad for investors.

FTSE 100 movements

We based our analysis on the blue-chip FTSE 100 Index, which contains the 100 largest listed companies quoted on the London Stock Exchange.

It’s widely regarded as being the bellwether for the UK economy, even though many of its constituents have sizeable overseas revenue streams.

We opted to chart the performance of the index in the two months preceding the last five UK General Elections and the month following polling day.

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Mixed experiences

Our findings provided a mixed bag of results. The FTSE 100 has risen twice in the two months leading up to an election – in 2019 and 2017 – but fallen in the previous three.

Similarly, in the month following election day, the FTSE 100 has risen twice – in 2019 and 2005 – but fallen on the other three occasions.

The biggest increase was the 13.6% uplift it enjoyed in the run-up to the 2017 election, while the largest fall of -6% happened in the weeks before polling day in 2010.

Investment opportunities

Does that mean now’s a good time to get involved?

Fund manager Graham Ashby, head of the UK All Cap team at Schroders, believes there could be opportunities this year – even though timing shifts in markets isn’t an exact science.

“Sentiment towards UK equities is at a very low ebb, and we’re wondering if a change of UK Government might coincide with a turning of the tide for sentiment,” he said.

This backdrop, he believes, could encourage contrarian investors to enter the market in the hope that the new incumbents of Number 10 could make beneficial changes to the asset class.

‘A new government might just have some influence on when some of the conditions for UK equities improve,” he said.

Impact of a change in government 

A study by AJ Bell of the 16 general elections that have taken place since the inception of the FTSE All-Share in 1962 suggests the UK stock market isn’t frightened of a change in government.

Russ Mould, AJ Bell’s investment director, said: “On average, the FTSE All-Share has recorded a double-digit percentage gain in the first year after an election which sees one prime minister ejected from office and another, new one ushered into it.”

He also pointed out that the UK equity market has done better since 1962, on average, when the Conservatives have triumphed at the ballot box.

“Some investors could be forgiven for wishing for a Conservative government, on financial grounds, irrespective of their personal political preferences, especially as the average real, post-inflation return from the FTSE All-Share is markedly superior under Conservative governments.”

The information included in this article does not constitute regulated financial advice. You should seek independent, professional financial advice before making any investment decision.

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