UK Snap Election: What does it mean for our Tactical position?

UK Snap Election: What does it mean for our Tactical position?

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Tuesday morning Prime Minister Theresa May announced a snap election for the 8th June, perhaps encouraged by a wide lead in the opinion polls. This still needs to be voted on in the House of Commons tomorrow and is likely to be passed given other parties have openly supported an early election.

Why has it been called? Theresa May quoted we “needed certainty and strong government” as we move through the ongoing Brexit negotiations. This provides an opportunity to gain a stronger parliamentary mandate in order to do so.In the short term, this may lead to further uncertainty within an already crowded political European calendar. First round French elections are due to begin later this week followed by the German election later in the year. However, longer term depending upon the outcome of the election, an increased majority for the incumbent government may provide greater clarity as to the type of ‘Brexit’ that is negotiated.At the moment we feel there is no need to change our current tactical positioning to try and benefit from any short-term market impact but will monitor events as to any longer term changes that we feel may be necessary.

Aberdeen Asset Management Investment Manager Luke Bartholomew added that market reaction has been muted so far and agreed that the election result could provide further clarity around the type of Brexit that is negotiated.

He said: “No one was expecting this. Not least because the Government itself ruled an election before 2020 out barely four weeks ago. But Theresa May has clearly smelt an opportunity to consolidate her mandate ahead of the Brexit negotiations.

“The market reaction has been muted so far. Sterling sold off initially and has now come back. But it will take investors some time to digest the effects of the election in the next few days. A big factor for them is whether the election will make a softer stance on the Brexit negotiations more likely. The election should hand Theresa May a much bigger mandate to stand up to the harder line, anti-EU back-benchers which currently hold a disproportionate sway over her party’s stance on Brexit. That would be welcomed by financial markets. There’s also a decent chance of some volatility now with imminent elections in both the UK and France.”

This article was originally published by Investment specialist at Parmenion Capital Partners.

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Rob Hopkins
Rob Hopkins
I have experienced over 17 years working in the financial services including my time spent at Barclays Financial Management. I strongly believe in taking the time to understand what a client needs so I am able to find solutions that meet their specific objectives.

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