Elections, Investment and Market Update – June 2024

With the UK election set for 4th July, we’re writing to you with our thoughts—not as politicians, but as your financial advisers.  Please contact us if you would like to talk about your finances during this period. We are here to help.

The election date is big news, but we will keep our comments firmly on investments and how this may or may not influence investments during the next few months.

In short, we believe you should continue to invest exactly as you have been. Politics get the headlines, but it rarely impacts your investments. Even on the day Rishi Sunak announced the election, markets hardly budged with the FTSE 100 falling by less than 0.6%. The same is true for any other election in recent memory.

The decision to go to the polls comes during a period where investment markets are hovering around all-time highs. That’s probably the simplest way to describe what Rishi Sunak is banking on—people are starting to feel a bit better about the economy. Let’s dive into some of the details of that:

  • Observations on the economy – the consumer is the economy—over half of GDP comes from consumption, which means consumers play the largest single factor in how the economy performs. If consumers aren’t spending or feeling good, we have a problem. Fortunately, consumers are starting to feel better after a long, difficult period and we’ve had one quarter where the UK is growing faster than the US and Europe.
  • Inflation coming back near target – Part of the good feeling comes from the latest inflation reading, which is down to 2.3% and almost back to the desired 2% target. This could result in rate cuts, as predicted by many economists, which could take further pressure off many household budgets. Inflation is expected to fall further before the election.

Now for the good news, since the recent lows in September 2022 when inflation was rampant, markets have transitioned to opportunity, with the UK joining the US, Japan, Australia, Germany and others at new all-time highs.

This is great news for those who have remained fully invested and experienced their investment values recover from the more difficult investment periods of 2022 and 2023.

It is also good news for our approach of using a diversified investment approach to reduce risk. Even with bonds still going through a choppy period, the majority of investors will have seen their portfolios go up in value.

As stockmarkets fire back to new highs, some may start to wonder if it is a time to take some profits. Or for others, they may wonder if it is too late to put some excess cash to work.

Our take on this is statistical: staying the course historically wins. Investing during all-time highs still has a high probability of gains. In fact, all-time highs generally tend to be a great indicator of more all-time highs. There is evidence to show this from analysis of stockmarket performance going back as far as 1929.

So, while some investors may convince themselves, “I missed an opportunity”—there’s ample evidence that may not be the case. Specifically, all-time highs usually don’t happen without reason. In other words, economic and market conditions are improving which gives evidence to indicate there is still further growth to be achieved with investments.

All that said, we want to remain balanced and risk-aware during these periods. Markets do not move in linear patterns so we should not be surprised if sentiment shifts. This could happen both ways—with more good news or perhaps a setback. For this reason, we continue to favour a long-term approach of accumulating wealth while balancing the underlying risks.

To reiterate—statistically, it remains a good time to invest, and we encourage you to continue doing so if you have the capacity. Even with the UK and US elections on our doorstep, the current climate remains ripe for wealth accumulation, as long as you keep a long-term horizon and don’t get distracted by the next election headline. We’ll be with you on this journey, seeking to help you understand what matters.

I hope this helps make sense of the election announcement and the current environment. If you have any thoughts or concerns, please contact us.

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