The British Stock Market Performs Best Under Conservative Prime Ministers

The UK General election will take place in May next year. The contest will be mainly between the Conservatives and Labour. Though the radical U.K. Independence Party (UKIP) is growing in popularity among the general public it is highly unlikely to gain any significant number of votes.Ultimately either the Conservative or Labour party will win the elections as has been the tradition in the island country.

Equity markets in the developed world generally tend to have political preference. In the UK, stocks perform better when the conservative party is in power according to historical data. This is hardly surprising since the Labour (or “Labor” in U.S. English) policies have historically been anti-business. For example, Labour’s Ed Miliband has proposed levies on banks and price freezes by utilities. Clearly his plans will negatively impact firms operating in the financial and utility industries.

The table below shows the returns of the FTSE All-Share Index under the last nine Prime Ministers:

Prime Minister and PartyFTSE All-Share Index Return
Margaret Thatcher, Conservative (1979-90) 271%
John Major, Conservative (1990-97)107%
James Callaghan, Labour (1976-79) 67%
David Cameron, Conservative (2010-2014)38%
Edward Heath, Conservative (1970-74)22%
Tony Blair, Labour (1997-2007)20%
Harold Wilson, Labour (1964-1970)9%
Harold Wilson, Labour (1974-76)9%
Gordon Brown, Labour (2007-2010)-19%

Data Source: Thomson Datastream, AJ Bell Research

Source: World Investment Outlook 2015, AJ Bell

Of the top five best runs in the FTSE All-Share Index, four have come under the Conservative Prime Ministers. During the ‘Iron Lady’ Margaret Thatcher’s administration, the index soared by 271% as the economy took off when she privatized most of the state-owned industries that were plagued by inefficiencies and labour strikes.Under the current prime minister David Cameron, the index has had an excellent 38% return.

The all  four worst runs came during labour rule including most recently when Gordon Brown ran the country.

From an investment point of view, it is a good idea to keep an eye on the upcoming election and be ready to take advantage of  potential investments or adjust investments as needed.

Related ETF:

  • iShares MSCI United Kingdom Index (EWU)

Disclosure: No Positions

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