MENU

The FTSE 100 Won’t Celebrate This Tory Victory For Long

The Conservative Party has its unexpected majority and the FTSE 100 (INDEXFTSE: UKX) is up more than 2% as a result.

This is a good day to be a Tory, and a good day to be an investor in UK stocks. Especially if you hold Centrica, Lloyds Banking Group and Royal Bank of Scotland Group, which are all up more than 6% on the day.

UK-focused banks, regulated utilities, housebuilders and outsourcers are the big winners today. But they should enjoy it while it lasts.

Uncertain Uncertainties

If I had a pound for each time an analyst said that markets hate uncertainty, I would be a rich man today.

But markets do hate uncertainty, and the grim spectacle of a struggling minority or coalition government would have delivered that in spades.

The election result has banished that for now. As in 1992, when John Major beat the odds to romp home, the winning British vote is blue.

The FTSE 100 is celebrating the outcome today, but don’t expect the festivities to last much longer.

Minor Majority

Markets have the arrogant habit of taking good news for granted then swiftly moving on to the next question.

They got what they wanted this morning, and will already be worrying about what comes next. David Cameron will soon find himself in the same position.

He holds a wafer-thin majority, with a handful of seats still to declare at the time of writing. Cast your mind back to the 21 majority John Major won in 1992 — then remember how feeble that turned out to be.

Although his position has been strengthened, Cameron’s party is still full of Eurosceptics, who will no doubt fight him all the way to the 2017 referendum on EU membership.

Tight Squeak

I reckon the British will vote to stay in the EU, but it will be a tight squeak. The campaign will stir plenty of uncertainty, given the potential impact on of a “Brexit” on business, sterling and just about everything else.

Then there is the Scottish question, with the Nationalists already saying that the new government has no legitimacy north of the border.

The pull towards independence will surely become greater, possibly even unstoppable.

Talk about uncertainty.

Local Election, Nobody Dead

Investors should also remember that FTSE 100 companies generate more than three-quarters of their earnings overseas. They will be free to do so unimpeded by the excessive regulation expected from Labour.

Markets will already looking to foreign shores and this afternoon’s US jobs data. When that is out of the way, there will be the Grexit, the Middle East, the oil price, and a host of market-shaking events far beyond the UK’s parochial electoral concerns.

David Cameron’s election triumph? Markets are already over it.

The FTSE 100 may be a capricious beast but it can make you seriously wealthy in the longer run. 

To find out how UK stocks and shares can make ordinary people rich you need to read this Motley Fool report 7 Simple Steps For Seeking Serious Wealth.

By following these steps you could even hope to join the growing number of UK millionaires who earned their wealth on the stock market.

This report, which is currently FREE, sets out how investing in stocks and shares can make you seriously rich.

It won't cost you a penny to download, so click here now to get this completely free report.

Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.