What will a general election mean for the UK stock market?

The Prime Minister must hold an election before 28 January 2025. Our writer considers what the consequences might be for the domestic stock market.

| More on:

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

With a general election imminent, I’m wondering how a change of government might impact my portfolio. The chart below shows how the FTSE 100, used as a proxy for the wider UK stock market, has performed under our last nine Prime Ministers.

Encouragingly, only three of our leaders have presided over a fall. To be fair, Boris Johnson had a pandemic to deal with. And Gordon Brown was unfortunate to be in office when the global financial crisis hit. As for Liz Truss, well, what can I say?

Source: author’s calculations from data provided by MarketView

‘Events, dear boy, events’

But a British Prime Minister can do little to influence global events. This makes me think luck has been a big factor in determining how the market has performed under their tenures.

However, I think the chart illustrates a more important point. Generally speaking, those serving the longest saw the biggest increases in the FTSE 100. And that’s because successful investing requires taking a long-term view.

During the Footsie’s first 23 years, Margaret Thatcher, John Major and Tony Blair saw the index increase from 1,000 to 6,527. This tells me that longevity of service, rather than any specific policies, is probably the biggest reason behind the differences highlighted.


The index of the 100 largest listed companies was launched in January 1984.

Margaret Thatcher was in charge at the time and she was committed to the privatisation of a raft of state-owned industries. She told the 1985 Conservative Party conference: “Let us together set our sights on a Britain … where owning shares is as common as having a car”.

With one third of adults investing directly in the stock market, there’s a long way to go before that vision is fulfilled. But it’s undoubtedly true that we’re now closer to a share-owning democracy than when she first took office.

Ringing the changes

One of her early privatisations was that of BT (LSE:BT.A). In 1984, I remember my dad proudly telling me that he had bought shares in the company. I had no idea what this meant.

On flotation, the telecoms giant had a stock market valuation of £7.8bn. Today, it’s worth £10.2bn. But to have kept pace with inflation, its market cap should be over £30bn.

If BT were a PM, I think it would be more of a Gordon Brown than a Boris Johnson. It’s a steady — if unspectacular — performer. For the year ended 31 March 2024 (FY24), analysts are expecting earnings per share of 15.9p. Over the next two years, this is forecast to be 16p (FY25) and 16.1p (FY26).

However, despite a rise in earnings, the ‘experts’ are forecasting the dividend to fall slightly from an anticipated 7.7p in FY24, to 7.31p, by 2026. Even so, the stock’s still yielding an attractive 7%. Of course, dividends are never guaranteed.

With both main political parties adopting a near-identical approach to taxes and borrowing, if there’s a change of government, I suspect it’s going to have little impact.

Individual companies may be affected by the introduction of specific policies that affect their industries. For example, BT has been lobbying the Labour Party to encourage easier rollout of broadband to blocks of flats. But overall, it’s probably going to be business as usual for the UK stock market.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Beard has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

A pastel colored growing graph with rising rocket.
Value Shares

These FTSE 250 shares are tipped to rise 14% to 18% in the next year!

Looking for the best FTSE 250 momentum shares to buy? Here are two that City analysts expect to soar in…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

Lloyds’ share price is up 20% in 3 months! How high can it go?

Lloyds’ share price has ripped higher recently. Here, Edward Sheldon provides his view on the level it could potentially climb…

Read more »

Investing Articles

Why the Rolls-Royce share price could continue to outperform

The Rolls-Royce share price keeps moving forward, but this Fool thinks it's still behind where it ought to be after…

Read more »

Fireworks display in the shape of willow at Newcastle, Co. Down , Northern Ireland at Halloween.
Investing Articles

The City expects explosive growth in earnings from this almost-penny stock

It’s rare to find earnings predictions as robust as those for this not-quite-a-penny stock, so I’d research and consider it…

Read more »

Investing Articles

As earnings rise 600%, is Nvidia still the best AI stock to buy?

With the supply and demand equation still looking strong for Nvidia, is the stock still the best AI opportunity for…

Read more »

Value Shares

Cheap UK stocks are soaring! Here’s 1 to consider buying now

In recent weeks, many UK stocks have surged. Here, Edward Sheldon highlights a blue-chip FTSE 100 share he believes could…

Read more »

Investing Articles

Top alternatives to consider as the IAG share price climbs!

I've been bullish on IAG shares for some time, but as the IAG share price pushes upwards from its pandemic…

Read more »

Investing Articles

£50k in savings? Here’s how I’d aim for a second income worth £60,000 a year

Many of us invest for a second income and the prospect of an easier life. Dr James Fox explains how…

Read more »