UK general election

We don't want to add unduly to the pages and pixels already covering this and all saying pretty much the same things. The investment implications of the announcement and the eventual result are in our view limited. This verdict might change when the parties' manifestos are published, but we doubt it. Gilts and the pound have not been moved significantly by the news.

The date chosen by the Prime Minister – 4 July – is several months earlier than expected. As surprises go, however, it is not that big. At the start of the year quite a few pundits had been tipping May. As we see it, the economy will be a bit bigger, real wages a bit higher, and interest rates a little lower, in (say) November; but the UK economy has already beaten low expectations in the last six months, the ‘cost of living crisis’ has faded and real wages have regained more most of their lost ground (not that any of this is widely perceived or reported). And economic considerations will not have been the only ones as the PM chose the date.

Labour are roughly 20 percentage points ahead in the polls. The results of the recent local authority elections suggested a smaller lead (perhaps ‘only’ half as big), and the scale of recent Labour by-election successes has reflected big falls in Conservative support and voter turnout rather than big gains in Labour votes. And polls can change during a campaign. Nonetheless, for Labour not to win a majority would be very (very) remarkable.

Two key investment points: (1) Labour looks more ‘electable’ now because it has moved towards the centre; and (2) other things likely matter more to UK capital markets. On the first point, Labour will never be as pro-business as the Conservative Party, but it is not likely to raise taxes dramatically, revive collective pay bargaining, or add (even more) to government borrowing (even though, on the latter count, perhaps it should: UK infrastructure is in poor shape, and there is little practical correlation between real government borrowing costs and the amount of borrowing). On the second point, the things which matter more for UK clients' portfolios include the global business cycle and global (rather than domestic) politics. History demonstrates this clearly: economic and market performance in the post-war period has not correlated neatly with the red/blue phases of the charts

Both sides will use economic hyperbole in their campaigns, and some very silly things are going to be said. Be prepared for the preposterous. We may not be able to predict the result any better than anyone else, but we confidently predict that the UK's economic signal-to-noise ratio is about to take one of its periodic plunges…

^{Past performance is not a guide to future performance and nothing in this article constitutes advice. Although the information and data herein are obtained from sources believed to be reliable, no representation or warranty, expressed or implied, is or will be made and, save in the case of fraud, no responsibility or liability is or will be accepted by Rothschild & Co Wealth Management UK Limited as to or in relation to the fairness, accuracy or completeness of this document or the information forming the basis of this document or for any reliance placed on this document by any person whatsoever. In particular, no representation or warranty is given as to the achievement or reasonableness of any future projections, targets, estimates or forecasts contained in this document. Furthermore, all opinions and data used in this document are subject to change without prior notice.}