Politics and the UK Stock Market in 2009
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So, it seems that we may well soon be saying adieu to one of the big three auto makers State side. It has been educational, to say the least, that it has taken so long for the axe to fall in a nation that practically worships capitalism.
Except for the occasional blip into positive territory, the Big Three seem to have been losing money for most of my working life. The long slow crash will unfortunately take many companies down with it.
In reality Obama would probably have preferred to get this out of the way before he took up office as all the problems can then be safely blamed on the previous administration.
In the UK there is now another variable to be taken into consideration and this is the potential for an election in early 2009. Politicians are understandably nervous over their jobs as most of them appear to be virtually unemployable outside of the political arena.
With a big surplus of Labour backbenchers to be considered, Gordon Brown may decide that the prospects of re-election now will be considerably greater than in a year or so.
Due to the way that the seats are made up the Tory party need some 6-7% more votes than Labour merely to win more seats in Parliament let alone achieve a working majority.
The current administration may consider the prospect of fighting on the perceived strength of the Prime Minister in tough times versus the inexperience of David Cameron will make for their best chance to win. After all, David Cameron was really picked to fight against Tony Blair.
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The ‘men in grey suits’ often described as the Tory kingmakers may decide, given time, that a more aggressive performer such as William Hague would stand a better chance of victory.
The prospect of another five years of this leadership might not be taken well by investors given that the FTSE 100 has actually lost value in the eleven years since New Labour came to power. And this is even though much of the FTSE 100 has been replaced, in that time, by higher valued foreign components.
That’s good news for anyone spread betting on the FTSE to go down. It’s not so good for anyone else.
For all of the current angst over housing valuations, the fall in bricks and mortar (even in the short term) is far, far, less than equities. Over a ten year time horizon the differential is monumental.
The perceived wisdom that, in the long run, equities will always be the best performing sector is taking a bit of a hammering at the moment. Housing is still almost three times the price today as in 1997. For those who claim that property cannot fall too far due to the lack of supply versus demand, the absolute value versus other asset classes might be also educational.
As Simon Denham of Financial Spreads recently said, “even if the Housing Market fell 50% from where we are now it would still have performed credibly against equities”.
"Politics and the UK Stock Market in 2009" last update by R Thomas, 05-Feb-2009
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