On 7 May 2015, David Cameron and his conservative party were voted back into power with a majority vote. At the time, we expected most would enjoy business as usual and some sectors could sigh with relief. This has happened to an extent however, investors will be aware 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.

At the time we were of the impression the result would please energy companies such as Centrica. 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. Additionally, we believed the banking sector would be relieved having to not face Labour’s position on higher banking levies. The banking stocks jumped on the election news, but the China led selloff 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 $2.9bn in cost savings. Even the UK focussed banks have felt the pressure, but added weight to these stocks has also come from the delay in interest rate rises.

However, the biggest winner on Election Day was the house builders, encouraged by the belief the Conservative government will promote greater supply through planning consent and encouraging demand. As expected, all the companies in the sector have risen and continue to perform well. Taylor Wimpey is up by 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.

Defence companies and support services groups were also sectors that reacted well in May. However, 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 instead of an Ed Miliband led government, but weaker overseas conditions are outweighing on our large cap international companies. However, the UK focused businesses, such as the housebuilders, are marching on due to a relatively healthy UK economy, much as we expected.

Helal Miah is investment research analyst at The Share Centre

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