JPM Strategist

May calls for June election

Earlier today, UK prime minister Theresa May announced her intention to call an early general election for Thursday 8 June.

Go to the profile of David Stubbs
Apr 18, 2017
0
0
Upvote 0 Comment

She made it clear that this election would be about her approach to Brexit, saying current divisions within Westminster jeopardise the UK’s negotiating position with the EU, which she wants to strengthen. Polls suggest that the election is likely to produce a larger Conservative Party majority than the narrow one it currently holds in parliament. We do not expect a large change in expectations around Brexit, except that there is potentially more room for government to let all or some of the negotiations continue past 2020.

Market implications

Sterling initially fell as preparations for Theresa May’s speech began, but quickly regained its footing , and had even strengthened somewhat at the time of writing. UK equities, which had opened the day down on weaker commodity prices, continued to fall. Government bond yields were little changed, despite some volatility.

Markets are pricing in a minimal change in the UK’s position, both domestically and in the Article 50 negotiations. A stronger government would marginally favour UK risk assets and the pound, given the high value investors place on stability. A resounding victory for Teresa May could also entrench her control over the Conservative Party, allowing her more freedom to negotiate the Brexit deal that best protects the UK’s national interests.

Unless the Conservative Party’s large lead in the polls erodes, markets are likely to price in a continuation of both current domestic policies and the UK’s negotiating stance on Brexit. This should dampen volatility as election day approaches. But if the polls narrow, significant volatility in UK assets, especially sterling, should be expected.

While the June election will generate much press attention and commentary, investors should remain focused on the fundamentals. Global growth conditions, commodity prices and the pace of consumer spending in Britain will likely have more bearing on UK asset returns in coming quarters.


Read more Insights from J.P. Morgan Asset Management's Global Market Strategists


For Professional Clients only – not for retail use or distribution. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are unless otherwise stated, J.P. Morgan Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all-inclusive and are not guaranteed as to accuracy. The companies/securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. J.P. Morgan Asset Management may or may not hold positions on behalf of its clients in any or all of the aforementioned securities. This material does not contain sufficient information to support an investment decision and investors should ensure that they obtain all available relevant information, including fund specific risk warnings, before making any investment. The value of investments and the income from them may fall as well as rise and investors may not get back the full amount invested. Issued by JPMorgan Asset Management Marketing Limited which is authorised and regulated in the UK by the Financial Conduct Authority, Registered in England No. 288553. Registered address: 25 Bank St, Canary Wharf, London E14 5JP. 0903c02a81d68ca7


Go to the profile of David Stubbs

David Stubbs

Market Strategist, J.P. Morgan Asset Management

David Stubbs is a global market strategist within J.P. Morgan Asset Management's Global Market Insights Strategy Team. He is responsible for communicating the latest market and economic views in the UK and around Europe.

No comments yet.