Government

A word most of us had probably never heard before but now hear on a regular basis is Proroguing. As a result of all that has been going on in the government, it raises a query as to what impact a change in government, or prime minister is likely to have on the performance of the stock market, and whether it would be sensible to take some particular action now based on what may happen in the future.

In my view, trying to outguess the market and make significant changes to long term investment plans based on predictions regarding Brexit, government, prime minister, or any other totally unknown outcome, is highly unlikely to provide consistent systematic benefit.

Research provided by Dimensional Fund Advisers in May 2017 (just prior to the last general election) looked at the growth of £1 invested in the UK stock market over more than 60 years and 12 prime ministers from Anthony Eden to Theresa May. This research showed no obvious pattern of long term stock market performance based on which party was in power. The market, as ever, had ups and downs which did not correlate to any particular party or prime minister.

What it did show is that over the long run the market has provided consistent, substantial returns regardless of who lives at Number 10.

Exhibit 1: Growth of a Pound Invested in the Dimensional UK Market Index January 1956–December 2016

So what should you do?

Stick with the long term investment plan we have in place. There may be short term issues, particularly as we get closer to 31st October, but trying to outguess the impact on the stock market is impossible.

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