Where to invest your cash after the election

MAny thought a landslide victory for the Conservatives was a certainty when Theresa May called a snap election in April.

But now, six days before the nation heads to the polling booths, May’s victory seems far from written in stone.

Sensible investors should prepare for any outcome next Thursday.

As the graph shows, the value of £1,000 invested in the UK stock market in 1970 would now be worth £232,000.

‘ Since 1970, stocks have performed better under Conservative governments than under Labour, though share prices have been driven by global market forces rather than domestic politics,’ said Laith Khalaf, senior analyst at Hargreaves Lansdown. ‘Irrespective of who has been in power, the stock market has by and large risen regardless, posting positive performance during ten of the last 12 governments.’

If the Conservatives win, Ketan Patel, a fund manager at EdenTree Investments, said there could be money to be made from the party’s pledge to build 1m new homes by 2020.

He thinks all UK housebuilders will benefit from this, but said the best stocks will be those who can take advantage of May’s pledge to protect greenbelt land.

He said: ‘A good call would be Amersham-based Inland Homes, which develops regeneration projects in the South focusing on residentially led mixed-used schemes on brownfield sites.’

The Conservatives’ pledge to cap energy prices has already hit British Gas-owner Centrica and fellow gas firm SSE. Eric Moore, fund manager at Miton, thinks this will continue, and could even lead the pair to cut their dividends.

He also suggested avoiding price comparison websites such as Moneysupermarket and Zoopla, which owns uSwitch, because price caps usually put people off changing suppliers.

Each party has a different view of how the Brexit process should play out.

But David Buik, market commentator at Panmure Gordon, said financials could end up benefiting from Brexit talks, regardless of who the new prime minister is.

He said that no longer having to adhere to European regulations could give UK banks the freedom to make themselves more attractive to international firms, allowing them to win business off their EU counterparts.

In particular he recommended HSBC, Barclays, and Lloyds in the FTSE 100, and Aldermore in the FTSE 250.

As often noted, the value of the FTSE 100 tends to increase when the pound weakens and decrease when it strengthens.

This is because many of the index’s members make their money overseas, meaning they get more bang for their buck when the pound is on the floor.

As a result, the attraction of multi-national members of the FTSE such as AstraZeneca and Rolls-Royce after the election depends on who wins.

Adrian Lowcock, who is investment director at Architas, recommends investing in domestic rather than international firms if the Tories win, as the pound is likely to strengthen.

Conversely, Khalaf at Hargreaves Lansdown says international stocks are likely to fare best over the short term in the event of a Labour victory or a hung parliament.

‘Few UK share prices would escape some sort of markdown. But those international stocks may find themselves cushioned by a falling pound,’ he said.

All this being said, it is important to note that stocks are not affected by one event, such as the election, alone. They are shaped by a plethora of global influences.

As Khalaf puts it: ‘Even if you guess the outcome of the vote – no easy feat – you may still find yourself wrong-footed by the effects on financial markets.’