JAMES BARTHOLOMEW DIARY OF A PRIVATE INVESTOR

On Wednesday morning, the day after a general election was called, the stock market reacted with a shrug. It barely moved at all. The pound was like a bolshie teenager: wholly unimpressed.

One might wonder why this election has caused total indifference among investors. I think the answer is that most people reckon they know the answer to the most important issue. They are confident that Jeremy Corbyn will not win. The odds of Labour winning an overall majority are 16 to 1 against, at the time of writing.

There is certainly a big chance of no party having an overall majority. That possibility is joint favourite in the betting. If no party wins a majority, then the situation would be not too different from where we are now. In that case, there is no reason to change one’s investment stance. So inaction by the stock market makes good sense on that basis.

Zinc and palm oil demonstrate that prices reflect supply as well as demand

But I think the market might be underestimating the upside possibility. The other joint favourite is an outright Tory victory, which would mean five years of tolerably sensible government. That seems quite bullish to me. A whole lot of people who have taken some of their assets abroad or transferred them into cash might be tempted to return to British shares.

Meanwhile, what about individual shares and sectors? I have been buying shares that produce two

If you are struggling to see an advantage in the forthcoming general election, take a look at the odds on a Corbyn victory 90% The increase in the FTSE 100 since the 2008 crash despite subdued growth

commodities: palm oil and zinc. In both cases, the price of the commodity is a long way down on the highs of a few years ago. Palm oil trades at 2,505 Malaysian ringgits (£465) per metric ton, down from its Jan 2017 peak of 3,280 ringitts. Zinc, which reached $1.60 (£1.24) in February last year, is now at $1.16 a pound.

But the good news is that both zinc and palm oil have rallied convincingly from their lows, breaking through resistance levels and long-term downtrends. Another good sign for zinc is that levels of stock on the London Metal Exchange have been falling for the past five years.

The bullish case for palm oil is that depressed prices since a terrific peak seven-and-a-half years ago have caused plantation companies to cut back on planting. That means that there is no surge in new production coming on stream for several years now. Meanwhile, the long-term rise in consumption is sure to continue. So there is reason to hope that the uptick in the price could continue into a full-blooded bull market. Shares in the sector have been in a long decline. True, they are still not actually cheap at current prices, but if a bull market does develop,

China, India and other countries means a long surge in demand for many things – commodities, products and a wide variety of services, too, for that matter.

Another common myth is that shares go up when the economy is doing well. Of course, that certainly can happen and did so through the Nineties. But in the 11 years since the financial crash, economic growth has been subdued, yet the FTSE 100 share index has risen 90pc. Therefore, strong economic growth – or the lack of it – is not a reliable guide to stock market performance.

The cliché that irritates me the most is usually spoken by someone on radio or television who does not follow shares at all. He or she opines in a knowing way that “stock markets hate uncertainty”. Well, it does rather depend on what the uncertainty is. Some uncertainties are of little relevance to shares. And what really matters is risk. Which brings us back to Mr Corbyn.

The risk of him becoming prime minister now appears to be fading away. He had a positive net popularity rating two-and-a-half years ago. Now his popularity is at minus 36pc-40pc. One risk greatly reduced.

Strong economic growth – or the lack of it – is not a guide to stock market performance

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