The UK stock market has historically performed better under Conservative Prime Ministers than Labour ones, according to research conducted for the Evening Standard. However, the data also reveals an interesting exception to this trend – Liz Truss, whose short-lived administration saw a significant decline in the stock market.
Research from Bowmore Asset Management shows that the UK stock market has grown by an annualized average of 4.9% per annum under Conservative governments since 1983, compared to 3.9% per annum growth under Labour governments. This 1% gap may seem small, but over time it can lead to a substantial difference in pension or savings pots.
Margaret Thatcher’s second term in power from 1983 to 1987 saw the FTSE All Share Index grow at its fastest annualized rate in the last 40 years, with an average per annum growth of 38.2%. Thatcher’s deregulation of financial markets during the Big Bang of 1983 is credited with driving this growth.
On the other hand, Liz Truss’s brief time as Prime Minister resulted in a 4.2% decline in the FTSE All Share Index, equivalent to a theoretical annualized average of -31.3%. This stark contrast highlights the impact that different leaders can have on the stock market.
While some investors believe that government policies have little influence on share prices compared to factors like interest rates, the upcoming election in the UK and the US will undoubtedly have an impact on market sentiment. With the Tories struggling in the polls, these findings offer some reassurance to Rishi Sunak and his colleagues as they navigate the uncertain economic landscape.
