Home Finance Savings alert on possible General Election impacts on your investments and money

Savings alert on possible General Election impacts on your investments and money


We know that 2024 is going to be an election year – even if we don’t yet know when it’ll be. But for those who invest in the stock market, it’s important to know how a General Election might impact their investments.

What Does a General Election Mean for the Pound?

How long is a piece of string? The trouble with making predictions around investments and elections is that it all depends on who wins!

In the run-up to a General Election, historically the pound has wavered and weakened, then regained strength once a party is elected and the future of the next few years is clearer.

Because of this, investors should focus on the broader impact of changes to the stock market during the period before an election, rather than the currency itself.

 

Increased Volatility

As investors try to speculate on which companies will succeed or lose out following the election, the market is set to rise and fall quite dramatically in the run-up to one.

Some sectors, such as property, will vary more wildly than others, such as technology – it all depends on the parties involved in the election and their manifestos.

If political parties have a similar outlook on a sector in their manifesto, the market volatility is less likely to spike and fall. However, if it’s hard to tell who will win the election and the parties have opposing views on a sector, that’s more likely to drive speculation and, in turn, rapid spikes and troughs.

How to Manage Investing Before a General Election

With market volatility likely, keep an eye out for opportunities to buy stocks and shares if they dip. However, remember that the market variations will settle once an election is over and people know which sectors will benefit (and lose out) depending on which party wins.

Sectors that are likely to see the most volatility before a General Election include property, energy, banking, and retail.

So, sitting tight on your investments can be the right move if you want to ride out the spikes and dips. As with any investing, it’s all a bit of a gamble and you should only ever invest money you’re prepared to lose.

Signing up to newsletters from investment gurus can help give you a broad picture of what’s hot and what to avoid – but remember to seek independent financial advice before investing anything.

Your personal circumstances could affect what would be the best way to invest – online advice from newsletters (or articles like this) is always meant to be a guide and not financial advice.

Don’t Forget to Diversify

There are some ways to mitigate the risks of investing during a bouncy market. Some markets will always regain their value even if they dip a little – which is why investing in gold is so popular, while others turn to more modern investments in cryptocurrencies.

One of the best ways to make sure market volatility around a General Election doesn’t impact your investment portfolio too much is to diversify. Spreading your investments across different sectors – and countries – can help you mitigate losses. As one stock falls, another could rise, balancing out between them.

The type of thing you invest in is up to you – some people choose ethical funds picked for them, while others like to self-select to invest in specific companies. Whichever you prefer, make sure your investment portfolio has a range of industries to minimise risk

Which FTSE to Follow?

Finally, those investing in a FTSE index might be interested to know that the FTSE 250 has been positive in the approach to seven of the last eight General Elections – and in the past four, provided an average return of 11% in the six months prior to the election.

Before you run to invest, remember that the historical data also shows the same index dropping on the day of an election – which still makes it a risky investment. Past performance doesn’t always reflect the future! However, if you have money to invest and know that you could lose your whole investment (or gain a high return in a short space of time – high risk equals high rewards, sometimes), it could be worth looking at a FTSE 250 fund.

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence. When investing your capital is at risk.

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