2 FTSE 100 shares that could rise after the general election

Thinking about which FTSE 100 shares could soar and sink after this week’s general election? Here are two that could increase in value.

| 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.

In times gone by, the prospect of a Labour general election victory would be viewed with trepidation by many in the markets. Traditonally, the red party has championed higher taxation and tighter business regulations than the Conservatives. And this has sometimes had an adverse impact on FTSE 100 shares.

But markets are much calmer this time around, with those in the City encouraged by current party leader Keir Starmer’s vow to work closely with business to boost growth. Pledges to improve relations with the European Union have also gone down well with investors and economists.

Sea of calm

In one such example, Susannah Streeter, head of money and markets at Hargreaves Lansdown, has predicted that asset prices will remain robust should Starmer enter Downing Street.

She says that “in all likelihood, the impact of a Labour victory on financial markets would be minimal, especially if the current poll predictions materialise.”

Latest polling numbers from YouGov.
Latest polling numbers from YouGov

Looking at election outcomes, Streeter says that “a minority administration or coalition would be more unsettling as it would mean more uncertainty, and could hold back investment.

Streeter adds that a large majority “would enable the new government to get on with their agenda which has largely been digested by markets.”

A potential FTSE winner

That said, there are some important things for investors to remember. Parties can fail to deliver their manifesto promises, both intentionally and unintentionally. What’s more, other major events can happen that derail a government’s plans and cause stock markets to sink.

The Covid-19 pandemic erupted merely months after the Conservatives won the 2019 general election. And in the aftermath, the FTSE 100 collapsed to multi-year lows.

But there could be some major winners on London’s stock market if Labour carries out its post-election plans. One of these could be residential construction companies like Persimmon (LSE:PSN) which, in my opinion, already looks in good shape to grow sales as the UK’s population increases.

Analyst Streeter also notes that “Labour’s pledge to build 1.5m new homes by shaking up the planning system would benefit housebuilders facing slow approvals of new sites.” However, she does caution that “it remains to be seen how quickly this can be done.”

Persimmon has previously claimed that “the planning environment and limited land supply pose significant barriers to development and home delivery“. But reducing regulations is a contentious issue, and housebuilder shares could fall sharply should Labour’s plans run into trouble.

Renewables boost

Renewable energy stocks like SSE (LSE:SSE) could also rise in value if polling projections prove correct. Labour announced in its manifesto that it plans to “work with the private sector to double onshore wind, triple solar power, and quadruple offshore wind by 2030“.

As with the housing market, Labour has vowed to ease planning restrictions for new wind farms within weeks, should they win the election. This would be a big boost to SSE, which is focusing on wind power to drive future earnings.

More favourable planning regulations don’t make the FTSE 100 a slam dunk buy however. Building renewable energy assets is famously expensive and a significant drag on profits.

That said, I still believe SSE should thrive as the climate crisis drives green energy expansion. It could be a strong performer, regardless of who wins the election.

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 Persimmon Plc. The Motley Fool UK has recommended Hargreaves Lansdown Plc and YouGov 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

Investing Articles

£10k in an ISA? Here’s how I’d aim to generate a ton of passive income

I dream of escaping the shackles of a salary with financial independence and a steady stream of passive income. Here’s…

Read more »

Investing Articles

Are Burberry shares a bargain or a value trap?

Appearances can be misleading in the stock market. Shares that look like a bargain can turn out to be a…

Read more »

Investing Articles

How I’d target £17,673 passive income with just £100 a week

Our Foolish writer explains how he’d build a portfolio capable of generating a life-changing passive income with limited capital.

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

If I’d put £20k into a FTSE All-Share tracker fund 10 years ago, here’s what I’d have now

A lot of UK investors have money in FTSE All-Share tracker funds. Here, Edward Sheldon looks at how these products…

Read more »

Investing Articles

How I’d invest £10k in a SIPP to target £28,000 annual passive income

Investing just £10k today in a SIPP could be the key to a chunky retirement income in the long run.…

Read more »

Investing Articles

How I could earn a second income worth £35,000

Millions of us invest for a second income. Our writer explains how he's making it work and shares tips for…

Read more »

Investing Articles

3 ways Labour could impact the Rolls-Royce share price

Labour have swept to power on a pro-worker, pro-business ticket. But how could the new government influence the Rolls-Royce share…

Read more »

Fans of Warren Buffett taking his photo
Investing Articles

No savings at 35? I’d use Warren Buffett’s method to try and build massive wealth

Warren Buffett made most of his multi-billion-dollar fortune after turning 50. So what was his trick to building enormous wealth…

Read more »