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13 December 2019

Boris delivers and Santa is likely to follow

Markets and Sterling are rallying following last night’s large Conservative majority win. Boris Johnson led the Conservative party to its biggest win since Margaret Thatcher’s victory in 1987, defying polls in the last few days that showed a narrowing lead. The Conservatives have delivered a substantial working majority and tore down Labour’s traditional red-wall in the Midlands and North East of England.

With a working majority in Parliament, the Tories will be able to move forward with the Brexit deal negotiated by the Prime Minister back in October, finally resolving the political deadlock that has paralysed Westminster for three years, and, most importantly for investors, removing some of the uncertainty that has held back UK equity markets.

Asian stock markets were higher overnight as was the Pound, as investors welcomed the reduced uncertainty. The Pound has risen to US$1.34 against the US Dollar and rallied to €1.20 against the Euro at the time of writing. The FTSE 100 is up 1.8%, as the positive sentiment competes against Sterling strength given that c.70% of FTSE 100 companies’ revenue is derived from overseas, while the more domestically-focused FTSE 250 is rallying sharply, up 4.1%.

This working majority was the hope for markets going into last night, and we now expect to see a strong Santa rally over the festive period into the New Year. This, along with the intimation by President Donald Trump of a US-China trade deal being close, should boost both UK equities and global markets in general.

As a firm, we positioned our investment management portfolios in such a way that clients were protected from any extreme outcomes during the run-up to the election, preferring not to risk our client’s assets on such an unpredictable event, but rather remain geographically well-diversified, through the blending of asset-classes.

However, given we now have more certainty in terms of direction we can focus on capturing the gains and utilising the likely election-bounce. The election result is a heartening and encouraging outcome for portfolios, alongside the wider UK economy. The focus now moves to both Brexit trade terms and, indeed, hope of a China-US trade deal to further boost markets.
 
Boris delivers and Santa is likely to follow

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Unite Group
29 July 2020
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