Following the shock Genereal election result from this morning, Finance Monthly reached out to Mark Dampier, Head of Investment Research at Hargreaves Lansdown, who discusses the impact that the election result will have on the UK investment market.
The current siuation is very different to the Brexit vote of last year. While the result is a surprise and may lead to another election later this year – market reaction has generally been subdued so far because the Tory government will remain in power, but a hard Brexit now looks less likely.
There will be no dramatic changes in domestic policy immediately, as there would have been under Labour, had they got in. Therefore, I see no need to make any rash investment decisions, given the range of possible outcomes over the next few weeks. Investors should sit tight or even buy, if the opportunity arises.
Overseas investment is unaltered by the election apart from changes to sterling, which should act positively as we have seen over the last 12 months. That said – remember a softer Brexit could see sterling recover.
We have always advocated a level-headed, long-term approach to investing, and I would urge investors to resist the temptation to make short-term, knee-jerk reactions. We could see some volatility over the coming days as more details emerge about the new government.
Once a government is in place, I expect the dust to settle fairly quickly. There will be a dawning realisation that everything has changed and nothing has changed. For the vast majority of UK companies, it will be a case of “business as usual” on Monday. Many companies have been around for decades and seen governments of both colours come and go.
In our view, investors should continue to pursue their long-term strategy. The international nature of the UK market means that in reality, the election result matters little for many UK-listed companies.
Chris Saint, Currency Analyst added: “Uncertainty over the formation of the next government means sterling exchange rates will inevitably remain volatile in the days ahead, as markets try to fathom how this could impact upcoming Brexit negotiations. However, the pound’s initial declines may have been tempered by hopes that any eventual deal which requires cross-party support might actually imply a ‘softer Brexit’ approach which could see the UK keep trade access to the EU single market for trade.”