Investing.com – The U.K. election is fast approaching, and JPMorgan takes a look at the potential accompanying equity strategies.
The U.K. general election is set to take place on July 4, and the polls are consistently pointing to a victory for the opposition Labour party.
“We believe the market impact will be net positive,” analysts at JPMorgan said, in a note dated June 10. “The current Labour party is occupying a centrist platform, and the perception of policy paralysis is set to move behind us.”
The Labour agenda is modestly pro-growth, but crucially with a likely cautious fiscal approach, the bank said, adding given the lack of fiscal space, Labour will likely focus on supply-side reforms to help improve economic growth.
The likely Labour win would be positive for:
1) Banks – Political and policy stability from a Labour party win would be supportive for the sector, particularly absent any risks around Corporation tax/Banking surcharge, as was the case during the 2019 elections.
2) Homebuilders – Housing will likely be core to the upcoming elections, with the focus on affordable housing, unlocking land for development and reforming the planning system.
3) Food Retail – Labour party support for policies like incentivizing private sector investment and continued focus on cost of living crisis.
A Labour party win would be less positive for:
1) Transportation – as nationalization of the railways would weigh on the sector;.
2) Energy – Labour has indicated that they intend to increase and extend the Energy Profits Levy and reduce some of the investment-related offsets.
Overall, the U.K. equity market is trading cheaply, the bank said – it is a low beta play, has China exposure, and the highest dividend yield out of all large developed markets.
JPMorgan recently turned more positive on the , versus the benchmark .
“We note that FTSE250 tended to perform better once BoE starts easing, and against the backdrop of better domestic activity momentum,” the bank said.