Powered by momentummedia
nestegg logo
Powered by momentummedia
nestegg logo
nestegg logo

Invest

How does the UK election affect global markets?

By Cameron Micallef · December 16 2019
Reading:
egg
egg

Invest

How does the UK election affect global markets?

By Cameron Micallef
December 16 2019
Reading:
egg
egg
Boris Johnson

How does the UK election affect global markets?

author image
By Cameron Micallef · December 16 2019
Reading:
egg
egg
Boris Johnson

With the Conservative Party regaining power, the world’s eyes turned to Brexit and how the new government will handle its impending exit from the European Union.

According to Paras Anand, Fidelity’s head of asset management, Asia Pacific, investors need to pay close attention to the result due to fiscal policy, contrarian signals on inflation and the strength of the British pound.

The Tory’s victory will likely see the government leave the European Union and change the outlook on inflation despite inflation measures showing signs of an uptick across world markets, Mr Anand said.

“Give the number of ‘false alarms’ over inflationary upticks in recent years, it is likely that central banks will position themselves behind the curve, which could, in sharp contrast to consensus, lead to inflation overshooting on the upside over the medium term,” Mr Anand said.

Quentin Fitzsimmons, fixed income portfolio manager at T.Rowe Price, believes the new government will mean rates are unlikely to be cut.

Advertisement
Advertisement

“The fact that a no‑deal Brexit is off the table in the near term reduces the likelihood of the Bank of England cutting interest rates anytime soon. 

“As such, UK government bond yields are likely to remain range‑bound for the time being, although they may fall if there are increased concerns over a global recession,” Mr Fitzsimmons said.

Mr Anand also said the strength of the pound is one to watch as the US dollar continues to be supported by a tighter stance to monetary policy.

“First, as the immediate rally in the pound suggests, this could be another signal that the long period of US dollar outperformance in the context of currency markets is coming to an end,” said Mr Anand.

Finally, the fund manager believes England is likely to rally through infrastructure and healthcare policies following a Conservative victory.

“Johnson, in particular, has a track record of supporting investment in larger-scale infrastructure projects. This aligns with a global trend we expect to continue in the coming months, one of the government’s finding recourse in fiscal policy rather than monetary policy to support economic growth,” Mr Anand said.

“While these campaigns are clearly focused on supporting domestic growth, it is important for investors to consider the cumulative impact of this global shift in economic strategy,” Mr Anand continued.

“At first glance, the outcome of a snap election in the UK should have little bearing for global markets. But considered in the context of what could prove to be more meaningful turning points in economic policy and market leadership, investors would do well to pay closer attention,” Mr Anand concluded.

How does the UK election affect global markets?
Boris Johnson
nestegg logo

Forward this article to a friend. Follow us on Linkedin. Join us on Facebook. Find us on Twitter for the latest updates
Rate the article
author image

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

Join the nestegg community

We Translate Complicated Financial Jargon Into Easy-To-Understand Information For Australians

Your email address will be shared with nestegg and subject to our Privacy Policy

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

Join The Nest Egg community

We Translate Complicated Financial Jargon Into Easy-To-Understand Information For Australians

Your email address will be shared with nestegg and subject to our Privacy Policy

From the web

Recommended by Spike Native Network

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.