David Jane, a manager of Miton’s multi asset fund range, says the surprise announcement of a UK general election was more impactful on markets than might have been expected. Namely sterling jumped nearly 2% on the announcement, with obvious negative effects on UK based dollar sensitive companies, i.e. most of the big stocks in the FTSE.

“We have been of the view that sterling is a bit too cheap on Brexit worries and, therefore, have been hedging much of our overseas exposure, across the multi asset fund range, into sterling reflecting that the risk of a reversion to fair value was greater than the risk of further declines,” he says.

As a result Jane argues the knee jerk reaction by short-term investors to exit their short position in sterling is understandable.

He says: “In some ways the forthcoming election removes a much wider range of uncertainties for investors than just scaring out the consensus short position in sterling. While many elections and referenda in the recent past have been quite close calls, this election is very unlikely to lead to anything other than a stronger Conservative majority.”

As far as financial markets are concerned he says this will mean much greater certainty around the Brexit negotiations and government policy in general.

“This makes the UK look relatively more attractive, from a political risk perspective, than before the announcement, particularly relative to continental Europe where there are close run elections in the three largest economies coming up over the next year,” he says.

“So the UK might be considered a safe haven relative to many other markets, with clear political leadership, an economy benefitting from a weak currency, continued low interest rates and a robust consumer sector.”

Within his multi asset funds Jane has recently been avoiding UK domestic exposure, instead preferring areas of the market with higher levels of clarity. These would include UK exporters, beneficiaries of the weaker sterling and a stronger global economy, or US consumers, where the outlook has been more certain.

However he thinks the forthcoming election should materially clarify the outlook for these areas while, at the same time, reducing the relative attraction of international stocks for UK investors. For these reasons he has re-established an exposure to UK consumer cyclical companies.

“This should help diversify our exposure to the broad global reflationary theme while continuing to enhance our preference, in a rising rate environment, for value stocks,” he says.