Haven Britain?
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HAVEN BRITAIN?
Britain's opposition Labour Party is on track to win Thursday's general election with a secure majority.
Likely incoming Prime Minister Keir Starmer will inherit a sluggish, debt-laden economy with big investment and productivity problems.
But some investors see better times ahead.
Prospects of political stability after years of tumult under the ruling Conservatives, just as France’s far-right resurgence rattles confidence in the euro zone, create a tempting haven narrative for long-neglected UK markets.
Speaking from his base in Geneva, Lombard Odier Investment Managers head of macro Florian Ielpo said: "The UK is one of the places worldwide where you can still find attractive valuations and political risk is (now) limited, which is not the case for instance in the U.S. and still not entirely the case in Europe."
UK stocks are not flying off the shelves.
The FTSE 100 .FTSE hit a record in May as markets started humming along to the tune of Labour’s 1997 victory song, D:REAM’s "Things Will Only Get Better", but has slid back since.
Savers pulled money out of UK-focused equity funds in June, Calastone data showed, continuing a trend that has persisted for years.
But managers of UK funds, who for years have had little to shout about beyond lowly equity valuations, are getting optimistic.
Ninety One UK portfolio manager Matt Evans said that while the UK had "felt unstable" for years because of Brexit and former Prime Minister Liz Truss' chaotic 2022 mini-Budget, Britain now offered more certainty than the U.S. and France.
"We can now look to (becoming) one of the more stable environments," he said.
British business investment ranks 28th out of 31 OECD nations. Evans said his conversations with companies indicated it would pick up once debt costs, taxation and trade policies felt predictable.
"Many simply want consistency and to know that the environment they're investing in is going to stay stable."
But Andrew Pease, head of global investment strategy at Russell Investments, recommended caution.
"Markets will applaud (Starmer) when he comes in but the issue is going to be (what happens in) the first three or four months."
"If he makes mistakes, which is quite possible, if he overreaches or if the left (wing of Labour) tries to gain ascendancy, markets will be super sensitive to this."
(Naomi Rovnick)
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