Russ Mould, investment director at AJ Bell, comments:
“History shows that since the inception of the FTSE All-Share in 1962 the index has tended to do better, on average, under Conservative Governments:
Prime Minister & term
Change in FTSE All-Share
Margaret Thatcher, 1979-90
John Major, 1990-1997
James Callaghan, 1976-79
David Cameron, 2010-16
Edward Heath, 1970-74
Tony Blair, 1997-2007
Theresa May, 2016-
Harold Wilson, 1964-70
Harold Wilson, 1974-76
Gordon Brown, 2007-10
Source: Thomson Reuters Datastream
“This would suggest that, if the polls are right and the Conservatives come out on top on Friday morning, we are unlikely to see much reaction from the market.
“However, markets don’t like uncertainty so if there is an unexpected Labour win or worse, a hung parliament and a period of political wrangling while a new Government if formed, there could be some short term market volatility.
“Whatever the outcome, investors are better off focusing on company and economic fundamentals rather than trying to second-guess short-term political developments and market movements.
“Certain sectors or individual firms could be affected by short-term shifts in policy – banks, transportation companies and utilities all have the potential to become (or remain) political footballs.
“Investors need to factor this into the valuation they are prepared to pay for them and when assessing specific firms they need to ask themselves whether a hung parliament, change in Prime Minister or a coalition or minority Government will really mean that customers will stop buying a company’s products or services, or insist on paying a lower price.
“Ultimately it is profit and cash flow that drive share prices in the long term so investors should not let short term political noise divert them from their investment strategy. If anything, they should consider using dips in the market to pick up their favoured investments at lower prices.”