The Big Three: The Election Edition (June 2024)

1 . Rainy days, Ming vases and national service

UK general elections are tame affairs compared to the circus and drama of the United States. Yet there have still been some memorable moments, even with both major party leaders being moderate figures compared to the Boris Johnsons and Jeremy Corbyns of 2019. The polls offer the Conservatives the barest chance of victory and so it must be prudent to prepare for a Labour win. We believe the continuation of tax and spending policy that has been pledged and the almost slavish determination of shadow chancellor Rachel Reeves to ingratiate herself to business, should reassure investors that markets will take a Labour win in their stride.

2 . Huge elephants

Perhaps the biggest challenge for investors is the conspiracy of silence from both leaders on the two big elephants in the room: the UK’s future relationship with Europe and fiscal plans that look close to impossible to fulfil. On the former it remains to be seen whether a large Labour majority would encourage Keir Starmer to re-visit a customs union with Europe; but given its potential to boost growth it is surely a real possibility. On the latter both parties are likely to be forced into higher borrowing to tackle public sector problems, and this gives us cause for ongoing caution around UK government bonds in the medium-term.

3 . But surprises do happen

However, for those of us who have stopped believing that surprises can happen whatever the polls say, we would be advised to look to India. Here pollsters openly wept on television as they realised that Prime Minister Modi - once the all-conquering figure in emerging market politics - has lost his outright majority against all the odds. An ebbing of political authority for Modi could, in the long-term, threaten the pro-market reforms that have made India the darling of emerging market investors since 2014 and will be watched with great interest in the months ahead.