Both the Conservatives and Labour have won the most seats in nine general elections since 1945. But in the nine years that the Conservatives won the most seats, the market has risen eight times with an average annual return of 10.8 per cent; while for Labour the market only rose in three years and the average annual loss was 5.8 per cent.
Figures show that on average the market has risen two months before an election, with an average return of 0.32 per cent. But after that, the returns in the following three months are all negative, with the second month after the election seeing an average loss of 1.3 per cent.
In 2015 the general election will take place on May 7, in which case history would suggest that the following two-month period up to July 7 will see a weak market. Of course, this period will overlap with the ‘sell in May’ effect, which often sees a weaker market at this time of the year anyway.
In summary, the historical precedent suggests the market will end higher in the election year of 2015 than it starts. Although such forecasts would most likely not have been supported by Winston Churchill, who stated: “I always avoid prophesying beforehand, because it is much better policy to prophesy after the event has taken place.”
Stephen Eckett is author of The UK Stock Market Almanac (Harriman House)
