• Investors are reacting to UK election results

Early price action suggests a fairly benign reaction, with markets adjusting to election results without signalling a material shift in the economic or policy outlook.

• Without policy change, political effects typically fade

Political events can influence investor sentiment in the short-term, but attention typically soon returns to growth, inflation, and earnings.

• Our positioning is anchored in a long-term approach

While we are monitoring near-term developments, our investment approach remains grounded in long-term fundamentals and economic analysis.

Following a number of elections held across the UK on Thursday 7 May, emerging results point to significant losses for the Labour Party.

In this short update, we review the immediate market response and place it in the context of our established investment views and positioning.

Early price action in financial markets this morning provides insight into how investors are interpreting the results of UK elections.

Initial reactions were fairly benign, perhaps indicating a view among investors that extreme outcomes could be avoided. As I write, UK government bond yields are slightly lower, sterling is up against the dollar, and domestically focused UK equities are outperforming their globally orientated counterparts.

The value of investments, and the income from them, can fall as well as rise and you may not get back what you put in. Past performance should not be taken as a guide to future performance. You should continue to hold cash for your short-term needs. This article should not be taken as advice.

We’ll be monitoring investor sentiment as more news emerges over the coming days.

Should any subsequent volatility occur, it will be important to remember that this is a normal feature of investing. Volatility usually reflects markets adjusting to new information, rather than signalling a fundamental shift in the investment landscape.

However, history suggests that unless political outcomes translate into clear and sustained changes in economic policy, the initial market impact of political events typically fades. Investors tend to refocus their attention on medium‑term drivers of performance such as growth, inflation, and corporate earnings. 

Politically-driven or otherwise, we recognise that periods of market volatility are inevitable, and our portfolios are constructed with this in mind. Our positioning is driven by underlying economic and fundamentals rather than short‑term political developments.

As I outlined in my most recent CIO Monthly letter, we invest with a global perspective and are currently neutral on UK equities. That said, we do maintain exposure to the UK equity market, and we currently see more compelling opportunities in domestically focused segments. Our analysis suggests that these areas offer stronger earnings momentum and greater sensitivity to improvements in the UK economy.

In currency markets, we remain overweight sterling. Valuation signals within the ‘Anchor’ component of our robust Anchor & Cycle investment process indicate that sterling is relatively attractive when set against the US dollar currently overvalued.

We also remain underweight government bonds, including UK gilts, reflecting our broader view that persistent inflationary pressures and a resilient growth backdrop support greater allocation to diversifying assets. While past performance is not a reliable guide to the future, assets such as gold and liquid alternatives have historically behaved differently from traditional defensive asset types like bonds, and may provide resilience during periods of market volatility and geopolitical uncertainty. 

At this stage, we are monitoring market reactions closely, rather than making immediate changes.

As always, our focus will be on any impact on the broader outlook for growth, inflation, or policy. For now, our core investment views and positioning remain unchanged.