Thursday, 20 April 2017

What does a snap election mean financially?

Image result for parliament

So, in a move that caught just about everyone out, Theresa May called a snap election. This means quite a bit for our little island. On top of all the usual national issues, like education, NHS, Armed forces, Social Care etc. We have Brexit. Which, given all the news, you could be forgiven there is nothing else going on politically here in the UK.

Image result for theresa may announces election

Without getting political, it did make sense for her to call the election, even though she had said she wasn't going to. If a week is a long time in politics, then 9 months must be an age... She did have to avoid the French and German elections, plus it does put a few of the critics to bed. The SNP have continually said she is unelected, so that would solve that issue.

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The B word (Brexit) does loom very significantly over Mrs. May's Government. There will be all sorts of compromise needed, and she needs a larger majority to get some of those things done. On the flip side, if she doesn't end up with a majority, we could all be in for a very long drawn out mess.

As soon as the announcement was made the markets all reacted and there was a drop in the FTSE of 2%, but as is always the case the pound rose fairly sharply at the same time. Looking at all of this coldly, Mrs. May has taken a political gamble, but also a financial one. If we do have a hung parliament again, then the financial institutions, that rely on stability, will go into meltdown.

Let's hope she has made the right call.

Short term, the markets will be a little more volatile than they have been. You only have to look at most of the past General Elections to see investors get nervous and markets become unpredictable. We also don't know what is coming, surprise announcements, and manifestoes etc.

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The polls have this a done deal as an election, but then the polls got the last election horribly wrong. However, if the polls are correct we will be in a stronger position to negotiate our withdrawal from Europe than we currently are, albeit not the strongest negotiation position ever. We have also seen some huge shock results in recent years. The European referendum was seen as a stay in win, Mr. Farage even conceded, and then results came in. The last General Election, then there is Mr. Trump. If this election goes the way of the polls, we will see some stability, but then France and Germany go to the polls. That could rock everything, we just don't know which way. The fact we don't know will mean a rather unpredictable few months, but most of the 'experts' are saying that Sterling will rise, which will have an effect on the markets.

The one thing we do know is there will be precious little other news floating around, unless Mr. Trump manages to do something that negates all of this of course.

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