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Possible investment fallouts from May’s general election

Monday 9th February 2015

With fewer than 100 days to go until the general election in May, Nick Hungerford, CEO and founder of Nutmeg, shares his views on the likely fallouts for investment portfolios:
Markets are likely to view a Conservative victory as better for the long-term economic and investment outlook 
“This is due to a number of factors, but put simply, amounts to Conservatives being lower debt, lower spending and Labour being higher debt, higher spending. Therefore markets could expect a Conservative win to mean a stronger pound and - given they are the incumbent - relative stability in markets.” 
“A Labour victory, given the comparatively higher public spending agenda and less focus on austerity, will weaken government bond prices and lead to higher borrowing costs. In this case, bond prices will fall and the value of traditional "low risk" portfolios (comprised of cash and bonds) will fall.”
Be careful about taking sector specific bets 
“For example, energy shares are likely to suffer if Labour wins given their stance on price fixing of energy costs. Make sure that you are doing the necessary research to avoid stocks and sectors that will be hit by policy change.”
Diversify your portfolio sensibly 
“Make sure that your investments are not all UK focused. Don't follow the herd by picking one of the "star" fund managers or choosing funds from "best-buy" lists. Construct a robust portfolio that has exposure to different asset classes (for example bonds, equities and commodities) and countries.” 
“For example; we believe that the US will be one of the strongest performing stock markets in 2015 and therefore it is important to have significant US exposure. US investments will naturally not be as correlated to UK election results as much as UK investments.”
Take note of currency risk 
“It won't just be the stocks or funds that you select that will matter. The election result could alter the value of sterling significantly. A stronger sterling will mean a harder time for exporters.  A weaker sterling (more likely if Labour wins) will be tough for companies that rely on importing raw materials.” 
“You (or your investment manager) can buy funds with currency risk 'hedged'. The election result will shift sterling and you want to be on the right side of this trade. This logic was behind our work before and during the recent Scottish referendum and improved performance for client portfolios.”
Opportunities can be built from policy changes around smaller companies, such as those listed on AIM 
“Look out for what the major parties have to say about fundraising and listing rules and if you are an experienced or high risk investor, consider where you might be able to take advantage.” 
*The views and opinions expressed herein are for informational purposes only. They are not personal recommendations and should not be regarded as solicitations or offers to buy or sell any of the securities or instruments mentioned. The views are based on public information that Nutmeg considers reliable but does not represent that the information contained herein is accurate or complete. 

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Editorial Contact Details - Conor Shilling
0845 672 6000
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