Exciting news in the UK’s biggest soap opera …

 

* Cue music *

Source: 7IM

A new Prime Minister! A new Chancellor! A new Foreign Secretary! The same Home Secretary!

 

Andy & John & Ed & Shabana! Plus a whole new supporting cast …

 

If the early indicators are anything to go by, there’s going to be a certain soap opera-ish quality to this government.

 

And just like the murders and divorces and car crashes in Albert Square (or Coronation Street or the Yorkshire Dales) the changes and the speeches and the policy nuances can suck you in.

 

With a soap though, you’re back in the room once you turn the TV off – something that we haven’t been able to DO with UK politics recently.

 

So. This is our friendly reminder, that while the media cares about characters, the markets care about context.

 

It’s not to say that politics doesn’t matter, or move markets – as we saw with Liz Truss’ brief moment in the spotlight, or Brexit.

 

It’s just that MOST of the time, the important things for returns are happening everywhere else but Number 10: economic growth, inflation, interest rates, technological progress and the occasional global crisis.

 

Which is why returns don’t look too much different between Labour and Conservative over the decades:

Source: 7IM/Refinitiv

Since the Second World War ended, Labour have been in government for 32 years, and the Conservatives for 49 years.

Looking at annualised returns of the FTSE All-Share throughout each government’s time in office, there’s not much to choose. 11.4% for Labour, and 10.5% for the Conservatives.

 

Any new government inherits the same context as the previous one – and manifestos suddenly go out of the window. While the cast might have changed, the backdrop doesn’t. Albert Square is still Albert Square.

 

So over the next few months (until the Budget, probably 😢), try to switch the soap opera off, especially when thinking about portfolios.