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Election impact likely to be less than feared, finds Halifax

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Investors may be worrying unnecessarily about the impact of the General Election on share prices, according to new research by Halifax Share Dealing.

The group found that over half (58 per cent) of investors believe the FTSE 100 will fall in the run up to the election next month. However, share prices have been unchanged, on average, ahead of the past 11 general elections.

Stockmarket values declined in the three months before polling day in six of the last 11 elections, falling by an average of 9 per cent. Prices increased by an average 10 per cent on the other five occasions.

There has been relatively little change in stockmarket values ahead of general elections since 1992, but during the 1970s and 1980s, double-digit percentage changes in share prices were common, happening in the three months prior to five of the six elections.

The largest decline in share prices (-26 per cent) pre-election took place ahead of the October 1974 election when Labour won with a three seat majority. The biggest rise (+24 per cent) happened in the run-up to the May 1979 election when Margaret Thatcher came into power.

On average, share prices have fallen modestly (-2 per cent), in the three months following the past 11 general elections. Stockmarket values increased in the three months following polling day after seven of the last 11 elections, rising by an average of 5 per cent. The biggest increase was after the Conservative’s surprise victory in 1970 when shares rose by 10 per cent.

The size of the overall majority achieved by the winning party, rather than the political complexion of the winner, has typically had a bigger impact on share price performance, though there was an average fall of 6 per cent after the five Labour wins compared with a 1 per cent average rise following the six Conservative victories.

Joel Ripley, Halifax Sharedealing, said: “It is surprising that despite the investor performance continuing to improve, optimism for the short, medium and long terms have all decreased. It could well be down to uncertainty around the impact of the upcoming election…However, history shows that overall there has been little change in share prices either in the run-up, or in the period shortly after an election over the past 45 years, although there have been some significant variations between particular elections.”

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