Investors are looking at UK markets as a safe place due to growing political uncertainty in the U.S. and Europe. The Labour Party’s big win in Britain has brought hope for stable policies and better trade with the EU, which might boost the economy after Brexit. Meanwhile, political problems in France and worries about Donald Trump possibly becoming U.S. president again make UK markets even more appealing.
Britain’s economic outlook is improving, with some bankers predicting a revival of the UK stock markets, which have been weakened by years of instability under Conservative rule. BlackRock Investment Institute has expressed bullishness on UK stocks, indicating a possible shift in sentiment among major global investors who have been wary of Britain since the 2016 Brexit vote.
However, these investors caution that the UK’s appeal may be temporary unless new Prime Minister Keir Starmer can significantly improve living standards without exacerbating the country’s financial stress.
Investors Turn to UK Markets Amid Political Turmoil in US and Europe
Despite the positive political shift, investors remain cautious. Pictet Wealth Management’s César Pérez Ruiz notes that while the UK may experience a short-term boost due to reduced uncertainty in Europe, more detailed plans on fiscal spending are needed from the new government. Ruiz has adjusted his investment portfolio to reflect current risks but remains uncertain about the long-term stability of the UK market.
There are signs of potential growth in the UK market, with expectations of significant IPOs from companies like Shein and De Beers. The UK market regulator has also implemented rule changes to encourage more IPOs. Despite ongoing withdrawals from UK equity funds, some market participants are optimistic about a broader revival next year, driven by renewed interest in London listings and early investor meetings.
However, concerns about the UK’s public finances persist, with state borrowing nearing 100% of economic output. Labour’s plans to attract private investment into infrastructure and housing could boost growth, but investors remain wary.
While gilts have short-term support from anticipated Bank of England rate cuts, long-term confidence in UK debt markets hinges on Labour’s ability to demonstrate fiscal prudence. Some large investors, like BlueBay Asset Management, remain cautious, and London’s FTSE-100 index continues to underperform compared to global benchmarks.
