6th November 2015
This Sunday marks six months since the last general election where the Conservatives claimed a shock victory; so how has the country fared?
The Share Centre’s investment research analyst Helal Miah made a number of predictions just after the election on how the stockmarket would look and has revisited these to see how right, or wrong, he was.
‘On 7 May 2015, David Cameron and his Conservative party were voted back into power with a majority vote,’ he said. ‘At the time, we expected that most would enjoy business as usual and some sectors could sigh with relief.’
Miah said this has happened to ‘an extent’ but ‘investors will be aware that the market has experienced a general sell off, driven by instabilities in China. This has made it challenging to analyse solely the impact of the new government’.
The energy companies were expected to benefit from the Tory government as there had been much talk from Labour pre-election about capping energy prices.
‘At the time we were of the impression that the result would please energy companies such as Centrica,’ said Miah. ‘The share price jumped up 6% on the day and has since fallen back by 11%, with most of the fall during August’s extreme volatility.’
The banking sector was also saved from Labour’s plan for higher banking levies and banking stocks rose higher on the election news but ‘the China led sell-off hurt HSBC and Standard Chartered’.
‘The latter in particular, as it recently announced restructuring plans to its business including 15,000 job cuts and finding $2.9 billion in cost savings,’ said Miah. ‘Even the UK-focused banks have felt the pressure, but added weight to these stocks has also come from the delay in interest rate rises.’
The largest winner on election day were housebuilders as the Conservatives were expected to promote greater supply through more relaxed planning rules and encouraging demand through homebuyer-friendly policies.
‘As expected, all the companies in the sector have risen and continue to perform well,’ said Miah. ‘Taylor Wimpey is up 13% as well as Barratt Developments, which is up by 15%.
‘These companies are benefitting from a robust UK economy with high levels of consumer confidence and low interest rates, along with the shortage of housing. The shares are still showing gains, despite some recent concerns of overvaluations within the sector.’
Companies in the defence and support services sectors also reacted well in May but ‘activity within these sectors has struggled to gain much traction mainly because of weaker conditions on international markets’.
‘We believe the stocks and sectors mentioned have benefitted and will continue to benefit from a Conservative government…weaker overseas conditions are outweighing on our large cap international companies,’ said Miah.
‘However, the UK-focused businesses, such as the housebuilders, are marchingon due to a relatively healthy UK economy, much as we expected.’