Please note: The following is not a political analysis. Milford does not favour any one political party over another.
A Labour led coalition is not a major surprise for financial markets. It’s certainly less of a surprise than the Brexit vote and the US election were in 2016.
The change in government creates new investment opportunities. As active investors, we believe changes, both large and small, create opportunities which Milford’s funds can benefit from.
There are still many important political details that have not been disclosed, for example policies and cabinet positions, but at this stage a few likely outcomes on financial markets are:
• Increased government spending
• Increased wage inflation
• Reduced immigration
• New housing policies
• Restrictions on overseas property investors
One thing that has not changed is that the performance of a company’s share price is still primarily driven by its earnings. The earnings of certain industries and companies may perform slightly better or slightly worse under a Labour led government than they would have under a National led government. But this is not surprising. This is to be expected, and skilled investors will recognise this as an opportunity.
At Milford, we relentlessly research companies, the economy and events that impact financial markets so we can position our funds to benefit our clients. The new government will present a new set of investment opportunities which we are eager to uncover.