Important Links

UK Election and Equity Markets

12 June 2017PoliticsEconomicsUK
Picture
  • The UK General Election last week was the 20th since 1945. Prior to this, there have been 9 majority victories for the Conservative party, 9 also (including one minority government) for the Labour party and one Coalition government.
  • On average, UK shares have performed worse than average rolling returns since 1945 in the 3- and 6-months following the previous 19 elections.
  • However, the average 12-month returns post elections is 14.6%, higher than the rolling average of 13.4% since 1945.
  • UK equity markets have historically been stronger in the 3-months ahead and after elections with a Conservative victory, but average 12-month returns have been stronger in the case of Labour victory. Citi analysts argue that 6-12 month equity market performance have been often driven by factors and trends away from domestic UK politics, eg global economic recession/recovery, oil crisis, conflict, global profit cycle etc.

  • A Conservative majority outcome would likely have had little impact on financial markets. A Labour-led government would likely have had a significant impact on UK financial markets, especially via a sharply weaker GBP.
  • In this case, the final result of a hung parliament is likely to see GBP modestly weaker.
  • Almost 70% of sales from UK listed companies come from outside of the UK. Given that the sterling could fall to 1.25 versus the USD, this may likely provide some support for UK equities.
  • In addition, many of those (UK stocks) have dividend yields over 3%, so the downside for the FTSE 100 could be limited.
  • Citi analysts are neutrally weighted in UK large-cap equities and underweight in mid and small cap equities.

Our recent research

Picture

The Trump-Kim Summit: What Next?

US President Donald Trump and North Korean leader Kim Jong Un met for the first time in Singapore last Tuesday, signing a joint declaration that North Korea will work towards “complete denuclearization of the Korean peninsula”.

Find out more

Politics
Picture

A Tale of Two Central Banks

The FOMC and ECB met last week, and their announcements highlighted the very different business cycle positon of the US and Euro Area.

Find out more

PoliticsEconomics
Picture

Investing in Data

Digital infrastructure stocks outperformed traditional REITs by 20% over the last five years and are less volatile compared to the broader tech sector.

Find out more

Economics

Take the first steps to your wealth management planning with Citi

Speak to a Relationship Manager
0207 500 1992

Already with Citi? Contact your relationship manager or view product availability on Citi Online

Why choose Citi

A relationship - not just a bank account

A dedicated Relationship Manager giving you access to our internal team of product experts and all our benefits

Access to exclusive Citi products

A range of current and investment products available both on shore and offshore, in the currency of your choice
Multi-currency accounts
Investment products

Global services for a global lifestyle

Our team is here to support you getting started in UK or with International travel and relocation
Moving to and from the UK
Travelling overseas

Offshore investments

We offer a diverse range of banking and investment services, including for those who want access to offshore investments

Find out more

Just moved to the UK?

We can save you time money and hassle. If you are a foreign national in the UK, Citi's International Banking Service can help you manage your money, home and away.

Find out more

Investment products are not insured by any governmental agencies, are not bank deposits, and are neither obligations of, nor guaranteed by, Citigroup, or any of its affiliates, unless otherwise stated. Investment products are subject to investment risks, including possible loss of some or all of the principal amount invested. Past performance is not indicative of future results, investments can go down as well as up.

“Citi analysts” refers to investment professionals within Citi Research (“CR”), Citi Global Markets Inc. (“CGMI”) and voting members of the Citi Global Investment Committee. Citibank N.A. and its affiliates / subsidiaries provide no independent research or analysis in the substance or preparation of this document. The information on this page has been obtained from reports issued by CGMI. Such information is based on sources CGMI believes to be reliable. CGMI, however, does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute CGMI’s judgment as of the date of this page and are subject to change without notice. This page is for general information purposes only and is not intended as a recommendation or an offer or solicitation for the purchase or sale of any security or currency. No part of this page may be reproduced in any manner without the written consent of Citibank N.A. Information on this page has been prepared without taking account of the objectives, financial situation, or needs of any particular investor. Any person considering an investment should consider the appropriateness of the investment having regard to their objectives, financial situation, or needs, and should seek independent advice on the suitability or otherwise of a particular investment. Citi Research (CR) is a division of Citigroup Global Markets Inc. (the "Firm"), which does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this information. Investors should consider this information as only a single factor in making their investment decision.

Opinions expressed herein may differ from the opinions expressed by other businesses or affiliates of Citigroup, Inc., and are not intended to be a forecast of future events, a guarantee of future results or investment advice, and are subject to change based on market and other conditions.