Proactive Investors - With the General Election exactly a week away, investors will are already wondering what the financial landscape will look like under Labour. Here, with the help of an excellent primer from Susannah Streeter, head of money and markets at Hargreaves Lansdown (LON:HRGV), we take a look.
Analysts expect the markets may remain calm even if Keir Starmer wins a super-majority. This is primarily due to Labour’s focus on long-term economic stability, rather than the sugar rush of an immediate consumer spending boost.
Shadow Chancellor Rachel Reeves has emphasised fiscal responsibility, aiming to avoid the bond market turmoil experienced after the disastrous mini-Budget by Kwasi Kwarteng under the short-lived Liz Truss administration.
No surprises
Labour's manifesto lacked surprising fiscal changes, signalling its intention to maintain financial market stability post-election. Minor announcements may precede an expected Autumn budget to build trust with investors.
While a Labour super-majority might not unsettle markets, a coalition government could introduce volatility. Such an outcome could weaken Labour's position, making it harder to implement its agenda and possibly leading to investor uncertainty.
Conversely, closer ties with Europe, as pledged by Labour, might positively impact valuations, countering some Brexit-related declines.
There's ongoing uncertainty about a potential increase in capital gains tax under Labour, and it's unclear if or how this change would be implemented, the possibility remains a point of interest for investors.
ISA developments have been widely discussed, but there was no mention of a British ISA in the major parties’ manifestos.
Both Labour and the Conservatives have expressed a desire to encourage saving and investing, possibly by lifting the overall ISA allowance rather than introducing another layer of complexity.
UK equities
If the goal is to make investing in UK equities more attractive, other measures could be considered, says Streeter in here analysis.
Often, retail investors are excluded from IPOs and secondary capital raising rounds. It’s essential that the FCA Review of the listing regime puts improving retail investors’ rights at its heart, she says.
There was no mention in the manifestos of cutting stamp duty on UK share purchases or increasing the dividend or capital gains tax allowances, which may disappoint some investors.
Changes to advice and guidance boundary rules are expected to progress, the Hargreaves Lansdown head of money said.
It was disappointing that there was no mention in the manifestos of the work being done to clarify these rules, which aim to make financial advice more accessible and useful without crossing into regulated advice territory, she adds.
And finally...NatWest
Although the NatWest (LON:NWG) share sale has been put on hold due to the General Election campaign, it remains part of the Conservative manifesto.
It was omitted from Labour's manifesto, but there are hopes it will still proceed. Past privatisation schemes have encouraged new investors, and similar initiatives could help kickstart investment.
Investors should adopt a "keep calm and carry on" attitude, says Streeter. The upcoming election presents uncertainties, but maintaining a steady approach is advisable.
Whether it’s changes in tax policies, the impact of closer ties with Europe, or new investment incentives, investors should stay informed and be prepared for potential shifts in the market landscape.