May’s general election will bring uncertainty for investors rather than ending it as normally happens when an election is decided, reckons Tom Stevenson, director at Fidelity Worldwide Investment.
“After this election we may have just as much uncertainty as we have in the run-up,” he warns.
The possibility of a hung parliament brings questions but that’s not the only uncertainty that will alarm stock markets. “We don’t know exactly what form a hung parliament might take,” Mr Stevenson points out. “The Conservatives and Labour are neck and neck at the moment, and the LibDems, who were the kingmakers in 2010, may actually not win so many seats this time. So we don’t know which alliances there may be.”
There’s also a risk of there being another election soon. “Depending on May’s election result we might see the Conservatives or Labour ploughing on trying to run a minority government and, a bit like in 1974, we could end up a second election in within the year,” he says.
“Interestingly the Conservatives have committed themselves to an in/out referendum on our EU membership by 2017. So if the Conservatives win the election, that could lead to two years of uncertainty about our relationship with our biggest trading partner, which is not good news for the pound.”
For all these reasons, he says investors need to be extra careful about ensuring their hard-earned savings are not too focused just on the UK. “This is quite a good time to make sure your portfolio is pretty well diversified. The UK market is quite reasonably valued and has good income attractions, but the political uncertainty may mean that it lags for a while.
He points out that other markets are doing well. To find out which markets he suggests could be good for a diversified portfolio, watch our video with him.Reuse content