With the election battle between Labour and Tories still far too close to call, many investors are genuinely worried about the prospect of having a hung parliament later this year. This could lead to a fragile coalition or a minority government, which is very concerning for business owners up and down the country.
City analysts are also worried about the prospect of an outright Tory win, which will bring the in-out EU referendum into play in 2017. The prospect of the UK leaving the EU would demoralise investors and destabilise markets for at least a couple of years.
Investor Confidence is Dwindling
Despite FTSE 100 showing record numbers above 7,000 lately, there are signs that investor confidence is dwindling. This may have a lot to do with the power of UK currency; as the pound has hit a five-year low when measured against the dollar. The outcome of the election will have an immediate effect on currency markets and we can expect the pound to take even more of a hit if an unstable minority government is established.
Nevertheless, we must remind ourselves that predicting currency trends is extremely difficult as many different factors have an influential part to play; not all of which are UK related.
Investors Told To Hold Their Nerve
Uncertainty should not lead to anxiety – at least that is the opinion of many industry experts across the UK. For this reason investors are being encouraged to hold their nerve rather than worry about the outcome of Thursday’s election. Typically, investors overlook the drama surrounding Election Day as the outcome usually has a minor effect on financial markets overall.
Even though the atmosphere of this election campaign is a lot different to what we’re used to, experts advise that investors act no differently and continue to hold their nerve. City pundits themselves have highlighted the fact that changes in power have very little effect on company profits. This is especially true for businesses that generate revenue abroad.
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