Pre-election market may perform stronger |
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Wed, 06 Apr 2005 01:00
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LONDON: Eventual confirmation, we will go to the polling stations on the 5th of May, after the Prime Minister Tony Blair postponed the general election announcement as a mark of respect to Pope John Paul II. In this context, two new reports have emerged one by F&C Asset Management and another by the Halifax, which takes a closer look at the performance of the stock market vis-à-vis the upcoming general election.
Both note that the UK stock market may improve pre-election as earlier trends show that two times out of three shares strengthen a month prior to the election date.
| After thoroughly analysing the stock market data for all previous general elections, right back to 1945, F&C Asset Management reached the conclusion that market performance fairs better when a Political Party wins the election with a majority of 50 or more seats. This means the market prefers stable and workable Parliamentary majorities, F&C Asset Management noted, which is indeed common sense.
F&C also observed that stocks and shares rallied by up to 4.4% every time the Conservative Party came out victorious in the election, while stocks fell by 1% after Labour gained election victory and got into power.
The Halifax, whose reports are also based on the last ten general elections and stock market comparisons commented that 'wider economy conditions generally attribute to the stock market fluctuations but it is the elections which really govern the share prices.'
Their report says three months before any general election fluctuations in the share prices are obvious since the market is still trying to find out the election outcome.
The report also said that the FTSE30 index never ever have performed well in any political party’s favour. It was noted by the Halifax that the strongest rise in the stock market came under a Conservative government between 1983 and 1987, where it touched 123% gains, but the FT30 fell 23% in the next Conservative parliament. Similarly, the second highest rise came under Labour government in 1970-74, where FT30 touched gains of 90%.
In 1992 and 1997 respectively, the FT30 rose 42% in real terms, with the market reaching a record high in 2000 but saw the market dip 47% between 2001 and 2005 due to dot com boom and subsequent bust.
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