The author is an expert in the field of multi-asset trading.
The UK General Election is Underway
The UK general election is underway and the battle for control of the House of Commons is heating up. As the ruling Conservatives go head to head with the opposition Labour Party, their ideological differences and positions on social issues are at the forefront of the public debate. The pound and global stocks are being carefully watched as the election outcome is no longer predicted to be a foregone conclusion, with possible surprises in store.
How We Got Here
Confident in her party’s electoral chances, Prime Minister Theresa May called for a snap election ahead of schedule, with opinion polls at the time supporting this self-assurance. Fresh off Brexit, May saw it as an opportune time for her party to cement its foothold and ensure an undivided parliament ahead of Brexit negotiations. While Labour had supported Brexit in the previous parliament, it had a different outlook on negotiation priorities and is pursuing its own approach.
Despite Conservative support being high at the election announcement, and remaining high for the following four weeks, Labour’s support has steadily grown through the seven-week campaign. The latest opinion polls show the Conservative party’s marked advantage declining to just a one point lead over Labour. Lead by Jeremy Corbyn, Labour’s campaign has proven to be effective, and the release of the party’s manifesto in mid-May had shored up even more public support.
Security Dominates Campaign
With the country still reeling from two major terrorist attacks in the last two weeks and an on-going investigation into the London attack making daily headlines, security is now the number one issue in the political debate. Each party leader’s history on security matters has been scrutinized, and Corbyn has gone as far as to call for May’s resignation over cuts in the police force she oversaw preceding the attacks. Corbyn has in turn himself been criticized for his past actions on security legislation.
How the Markets May React
As things stand, most analysts still see the conservatives winning control of parliament, but with a much slimmer majority than was anticipated a month ago. The pound has stabilized after dropping last week to its lowest level since mid-April, amid fears that May may have miscalculated her step. Most expect stocks to remain steady, with possible sell-offs coming only in the event of an outright Labour victory. Given the prospects, investors aren’t taking big risks as they wait for the outcome.