The Garrulous Jay – “Events, Dear Boy, Events”

When asked what the greatest challenge was for any statesman, Harold Macmillan purportedly replied, “Events, dear boy, events”. Last night we witnessed a seismic if widely anticipated political event, as the British electorate ushered in the ninth post-war Labour government by a landslide.

The 10.00pm exit poll predicted a Labour win with 410 seats, and with five seats left to declare they have 411.

(For the record, the GSFP Christmas Quiz average prediction was 382 seats for Labour. Congrats to the entrant who predicted 415, and commiserations to the one who guessed 406!)

It is highly unlikely that the result was impacted materially by recent events, but Rishi Sunak’s chances were certainly not helped by his rain-drenched announcement, his decision to leave the D-Day Commemorations early, and the mid-campaign ‘fluttergate’ scandal.

What unites these missteps is that, to a greater or lesser extent, they were events of the Tories’ own making, along with the timing of the election itself. This serves to make them less explicable and less excusable, depending on where you sit on the political spectrum.

Looking further back over the last 14 years it is easy with the benefit of hindsight to point to other self-inflicted wounds perpetrated by the outgoing administration. The disastrous miscalculation made by David Cameron in calling the Brexit referendum. The culture of impunity that saw the denizens of Downing Street choosing to ignore the Covid rules the rest of us were being asked to live by. And the now infamous Kamikwasi mini-Budget.

But there were events beyond the control of the last three Prime Ministers which also had a bearing, most notably Covid itself and the conflict in Ukraine.

Over the last few weeks I have been asked on a number of occasions what effect a Labour government may have on the markets and people’s investments.

My first response has been to point towards another election later this year that could have a far greater impact than that of the UK result. Here again, the ‘event’ that was the first US Presidential Election debate wasn’t so much an own-goal for the Democrats as an entire winless season condensed into 90 minutes.

Fund managers will spend much of their time considering how these events may impact upon their portfolios…but probably not too much.

Changes in the political landscape can have a bearing upon the short-term performance of markets, and the policies of different administrations may benefit and disadvantage different sectors and even different economies.

At the same time, however, what makes many great businesses great is that they have what it takes to succeed regardless of the political and macroeconomic backdrops.

Taxes, protectionism, regulations and restrictions on business practices: all these are challenges, or events, to be overcome rather than terminal headwinds for well-run and competently lead companies.

So I expect the advent of a Labour government, to have a limited impact on the financial markets, and in the long-run I would say the same of other political events to come in 2024. For now, I wish Sir Keir and his team well in confronting the events that lie ahead.