Investors think UK shares might soar after the general election! Are they right?

If history repeats itself, UK shares could surge following next Thursday’s election. Here’s one FTSE 250 stock Royston Wild thinks might shoot higher.

| 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.

We’re now just a week away from the Britain’s next general election. If investor predictions prove accurate, we could be about to see a surge in the value of UK shares.

As I type, it appears the Labour Party is on course to secure a thumping House of Commons majority. A convincing win by any political party is always cheered on by the markets, thanks to the stability it provides.

Vote share data from Survation.
Source: Survation

The results are in!

New research suggests that many retail investors believe a Labour victory could be good for the London stock market.

According to eToro, 44% of investors think British share prices will increase if Keir Starmer enters Downing Street. That compares with 30% who believe the opposite.

There’s some historic basis for believing a new bull run could soon be upon us. Dan Moczulski, UK managing director at eToro, says that “when Labour won power in 1997 the FTSE 100 rallied by 35% over the next 12 months.”

He adds that “whilst we’re unlikely to see anything quite so dramatic this time around,” he notes that “the FTSE 100 has already returned 7% so far this year, indicating that markets are comfortable with the expected outcome of this election.”

Nothing’s certain

However, there are some important caveats for investors to remember. Past performance is no guarantee of future returns. And, right now, inflationary pressures and escalating geopolitical tension remain a threat to share prices across the globe.

It’s also important to remember that not all stocks will benefit equally from a potential Labour victory. Housebuilders like Barratt Developments and building materials suppliers like Kingfisher could benefit from a possible rise in newbuild numbers.

Increased spending on healthcare and education might also boost primary healthcare facility provider Assura and educational resources supplier Pearson respectively.

However, potential losers could be water supplier United Utilities and train operator FirstGroup, given the greater threat of re-nationalisation.

A potential riser?

Those seeking possible strong performers after the election may want to look at Greencoat UK Wind (LSE:UKW). It is one of many renewable energy stocks in the UK that could benefit from Labour’s drive to improve green investment.

According to its election manifesto, Labour plans to “work with the private sector to double onshore wind, triple solar power, and quadruple offshore wind by 2030“.

Manifesto promises famously aren’t legally binding. But the growing climate emergency means rising investment in clean energy looks a certainty, regardless of which party wins the election.

Wind turbines generated 29.4% of Britain’s electricity in 2023, according to National Grid. This was up from 26.8% a year before as wind capacity continued to sharply rise.

This doesn’t mean companies like Greencoat will deliver powerful earnings growth every year. Even a ‘supermajority’ won’t allow Labour to control the weather. So businesses will still suffer during calm periods when energy generation tails off.

But over the long term, buying renewable energy shares could offer significant returns to investors. FTSE 250-listed Greencoat has delivered a total shareholder return close to 270% over the past 12 years. This could improve significantly if Labour makes good on its green investment plans.

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.

Royston Wild has positions in Barratt Developments Plc. The Motley Fool UK has recommended Greencoat Uk Wind Plc and Pearson Plc. 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

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

As AstraZeneca’s share price dips 4%, is it time for me to buy more?

Despite its 12-month increase, AstraZeneca’s share price appears very undervalued to me, and looks set to rise on strong growth…

Read more »

Investing Articles

FTSE 100 or S&P 500: where should I invest?

UK investors are often drawn to the high growth of US stocks. But there are pros and cons to be…

Read more »

Investing Articles

2 of the best US growth and dividend stocks to consider!

These heavyweight US stocks have been delivering tasty investor returns for decades. Here's why they could remain great picks for…

Read more »

Investing Articles

I reckon these 2 penny shares are hidden gems worth a closer look!

Some penny shares are well-known, whereas many others go under the radar, but that doesn’t necessarily mean they aren’t potentially…

Read more »

Investing Articles

Just released: our 3 best dividend-focused stocks to buy before August [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Investing Articles

2 FTSE 100 shares with blockbuster yields investors should consider buying

Our writer has noticed that these FTSE 100 shares offer mammoth dividend yields, and reckons investors should take a closer…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Down 36% and yielding 7.8%, is this FTSE 250 share a bargain?

Christopher Ruane looks at a FTSE 250 share with a sizeable dividend yield and a recent record of dividend growth.…

Read more »

Investing Articles

Is Barclays one of the FTSE 100’s best bargain stocks?

Right now, Barclays' shares are cheaper than those of FTSE 100 rival stocks Lloyds and NatWest. So should I buy…

Read more »