21st July 2022

3 minutes reading time

What does the change in political leadership mean for your multi asset portfolio?

Following the resignation of Boris Johnson as leader of the Conservative Party, Blackfinch Asset Management provides an update on the impact on our multi asset portfolio range.

To provide reassurance to our investors, our asset allocation is under constant review by the investment committee, and we are committed to communicating regularly on our portfolio activities.

UK Market Outlook in the face of political change

The immediate impact of Boris Johnson’s resignation, in the days that followed was minimal; the UK stock market has been muted, with a slightly positive skew on the Pound, as the uncertainty around his leadership and future became understood.

Boris Johnson’s resignation appeared to stem the growing political unrest caused by multiple resignations of key cabinet ministers in the preceding days. He has now taken up a “caretaker” position until a new leader is appointed.

It is important to note that, in addition to political factors, the UK stock markets are also influenced by other macro factors such as changes in commodity prices, the tightening of financial conditions by central banks, the rising inflation across global economies and the ongoing war in Ukraine. As such, it’s important not to look at the changing UK political landscape in isolation.

It is also of note that the top one hundred most capitalised companies in the UK, named the FTSE100, generate revenues across multiple geographies. These international income streams help to shield their performance from factors which are UK-based.

No tactical change is needed in the current climate

At Blackfinch Asset Management, we do not make asset allocation decisions based on binary outcomes as we believe this could lead to further volatility within our portfolios.

The current asset allocation of our portfolios is driven by a broad view of global markets and the UK represents a small portion of the regions that we invest in.

The market information, which is also widely available to market participants, does not support any tactical changes to the current multi asset portfolio. Given the fact that it is extremely difficult to predict the long-term outcome of his resignation and ensuing leadership contest, we cannot justify any asset allocation changes at this time.

How historic leadership battles impacted the UK stock market

Reflecting on the last change in leadership, in 2019, Theresa May stepped down as Prime minister and was replaced by Boris Johnson within two months. The market performance at the time was also muted, in a pattern similar to what we are experiencing now. This would suggest that UK stock markets are more heavily influenced by the macro factors discussed above and the wider economy than changes on the political landscape.

A new leader will be announced on 5th September, and learning from past history, we do not anticipate any major change in market conditions when that happens. We will remain vigilant in our monitoring of both UK and global markets and continue to be adaptive to circumstances if that changes.

In conclusion, whilst we recognise the inherent political uncertainty might be unsettling for investors, it is important to highlight that our multi asset portfolio range is globally diversified. Our investors are not fully exposed to the political uncertainty arising from this event.

If you have any questions about the performance of your portfolio or product options, please speak to your local BDM.

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