Election uncertainty…

What happens next?

I stayed up until the early hours watching events unfold and listening to commentators who were struggling to believe the results of the exit poll conducted by a consortium of the BBC, Sky and ITV.  Whilst it proved to be very accurate, pre-election polls where unhelpful in predicting the results, as has been the case in recent election results.

The election result has undoubtedly been influenced by the results of the Brexit referendum and people’s desire for a softer exit than that proposed by Theresa May in her “no deal is better than any deal” approach.

The defeat is highly embarrassing for Theresa May.  How long she remains as party leader will be seen in coming weeks and months.  However, there is no doubt that her dictatorial approach did not sit well with voters (or indeed many of her MPs).   It is highly likely the approach to Brexit will now need to change.  Those negotiating from a European perspective will know that the Conservatives do not have a mandate and this is likely to cause challenges.  However, the positive outlook is that it could become more of a win/win negotiation than a zero sum game.

Jeremy Corbyn ran a good campaign.  It looks as though Labour benefited from the desertion of UKIP voters towards those who were willing to take a more conciliatory approach to Brexit negotiations.  Similarly, Labour also appear to have benefited from the surge in young voters and indeed voting percentages in many of the constituencies were respectably high.

Never-the-less, last night’s result, along with the wider political landscape and recent terrorist activity, all create an air of uncertainty; something which humans and markets dislike intensely.  That said, although Sterling fell overnight, it was not by as much as expected by some pundits, although there is still a long way to go.

So what could all of this mean?  Some commentators are suggesting that a hung parliament would mean a consistently weaker Sterling which in turn means higher prices for UK consumers and a corresponding impact on retail sales.  On the other hand, this does mean that internationally biased investments, which many of our clients hold through their investment portfolios,  are worth more.

The significant losses experienced by the SNP and the corresponding move to the Scottish Conservatives (and Labour), also indicates the lack of appetite in Scotland for a further Independence referendum.  This in turn suggests a stronger United Kingdom which ought to be viewed positively and has to be better for the economy as a whole.

Much will happen in coming days and months but as we have said before, the sun still rose this morning and we will all go about our business as usual.

We have talked before about our three key principles and it is worth reiterating those again:

Have faith in the future –There will always be some crisis or other around the world that impacts on markets, but if we believe they are broadly efficient and capitalism works, then the long term trend is upwards.

Have patience – Have a plan and work it patiently for your lifetime and if appropriate, the next generation.  None of us are in this for the short term.

Discipline – Avoid doing the WRONG thing.  At times like this it is easy to be caught up in the broader sentiment.

Uncertainty presents opportunities and we will continue to work with you to make sure your plan stays on course whatever happens in the short term.

Keep calm and carry on.

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