How have UK investors fared one year into the new Conservative government?
Looking at the performance of the FTSE All-Share in the year since the 2015 election, and comparing it to the first year in office of other governments since 1987, data from the Share Centre shows the last 12 months have been the most volatile than any other post-election period.
“For many personal investors, it has certainly felt like a rollercoaster,” says Richard Stone, chief executive of The Share Centre.
“The certainty of outcome delivered by the General Election was quickly replaced by uncertainty surrounding the UK’s position in the EU, as well as growing uncertainty over the global economy, a sharp fall in the oil price, concerns over China, tensions in Syria, uncertainty as to the timing of US interest rate increases and more recently concerns over the US Presidential Election taking place later this year.”
However Brown adds that looking at the market data for the past year would suggest actually it’s not been as bad as personal investors may at first feel. He says that compared with other post-election periods, the stock market in 2015/16 has seen the greatest volatility, but also the smallest spread from its high to its low.
To give a sense of historical perspective, The Share Centre has looked back at the seven general elections which have taken place in the last 30 years and the first year after each.
According to the data, investors have seen the market lose ground in the first year of this government – a loss of about 8% depending on quite where the market closes on Friday 6 May. The average movement over the year following each of the last seven general elections, covering 30 years, has been +8%, and four of the last seven general elections have seen markets rise in the following year.
That said, markets have not performed as badly as in some other cases – for example in 2001 following Tony Blair’s re-election when the markets were still falling following the bursting of the tech bubble, and markets lost 17% in the year.
“Investors do have a sense that the market has been more volatile,” says Brown. “There is a perception that markets have experienced more dramatic moves up and down during the year than has historically been the case, however the data here is interesting and surprising.
“The overall market movement during the 12 months following last year’s general election has been the lowest when compared to any other general election in the last 30 years. In most cases the movement was around 30% from top to bottom in the year, but at 26% the last year has been lower, and substantially lower than the dramatic movements seen in 1987 when the market moved 58% from top to bottom.
“Here again there is a correlation between poor performance and volatility with the two worst performing years following a general election (1987 and 2001) also being the two years which had the biggest spreads from the market high to its low during the year.
“2015/16 therefore stands out as being an unusual 12 months after a general election – poor performance (the market has lost about 8% in value), high volatility (most days with movement >1%), but lowest spread from its high to its low. In other words, the market has been more volatile but traded within a narrower range”