Election Impact
The FTSE remains under steady selling pressure today with the index falling to fresh 2-month lows ahead of Thursday’s UK general election. The core expectation is that the Conservative Party will lose power with the Labour Party taking over. Given the party’s traditional perception as being more anti-business than the Conservatives, stock traders are showing some hesitancy ahead of the expected changeover in power later this week.
Market Reaction
Typically, the FTSE trades lower ahead of general elections before rallying once a decision is made. In the event of a Labour win, upside will likely be more muted. If we see Labour having to share power with another party, this should see a more stable reaction given the greater difficulty for Labour to change policy. Finally, if we see the Conservatives retain power (very unlikely at this stage), this should see a strong rally in the FTSE.
Global Election Uncertainty
Alongside the UK elections, the results of the first round of the French elections have also caused uncertainty, pointing to strong support for the far-right. With over 80 countries due to vote this year, including the US in November, there is a growing feeling of uncertainty. The risk of policy changes and the impact on global trade is likely to be a key headwind for companies in coming months.
Bullish BOE Impact
While stocks might find some continued near-term selling pressure, the broader picture should be bullish. The BOE is still widely expected to press ahead with rate cuts this year, in line with inflation falling back to target. Indeed, should inflation continue to move lower, we could still see a series of cuts from the BOE this year which should help drive demand for stocks later in the year.
Technical Views
FTSE
The latest test of the 8,331.6 level has seen the market turning lower again. Price is now testing the bull channel lows and retesting the broken bear channel highs, with structural support just below at 8,023.5. This is a major support area for the market. Should we break below, 7,811 sits as the deeper target for bears. In the Signal Centre today we have a an active buy at 8115 targeting a move back up into mid 82's.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.