General Election 2015: Uncertainty is the only certainty…

7th May 2015


It is very difficult for even veteran pollsters or political observers to make a prediction on the outcome of the General Election with any degree of certainty writes Peter Toogood, investment director at City Financial…

This is, of course, partly due to the rise of minor parties’ poll ratings and their unpredictable impact on the main parties’ vote shares in marginal constituencies. Will the Greens take key Labour votes? Or will UKIP take crucial Conservative votes?

This lack of certainty is key. The only factor on which we can place a high degree of probability is that no party is likely to achieve an overall majority. More than one “minor” party may very well be needed to support – or at least not to oppose – the next government.

This means that, as in 2010, we are likely to enter a period of political limbo as the party leaders try to form a government. The limbo period could easily be complicated by weakness in the leadership of any or all of the three main parties and the risk of a change in personnel that is not conducive to swift decision-making.

Against this backdrop, it is very surprising that the pound appreciated so strongly against the US dollar last week and that UK equities have endured such a strong period of outperformance relative to global indices. In our view, the likelihood of a period of post-election uncertainty – and the fact that Labour appears to have the upper hand in forming the next government at this stage – makes UK markets vulnerable to a correction relative to their global counterparts.


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