As Theresa May marks her first anniversary of being Prime Minister Richard Stone, Chief Executive of The Share Centre comments on what a difference a year makes:
Today is the first anniversary of Theresa May’s tenure as Prime Minister, having taken over from David Cameron in 2016 following the Brexit referendum result.
For personal investors it has been a very good year – but any euphoria amongst investors is undoubtedly tempered by their substantially less positive view of the future.
The FTSE All Share index is up 12% in the last twelve months. Along with dividend income any investor would have received, this represents a very decent return for investors with a general exposure to the market and follows on from the previous twelve months when the market delivered little or no growth but significant volatility.
To put the last twelve months in context, with base rates at 0.25% and inflation less than 3%, this represents a substantial real return. It compares favourably to the 14% return the market delivered in David Cameron’s first year as Prime Minister but lags well behind the 32% the market managed in Tony Blair’s first year.
In addition to a good return from the markets, investors have seen reduced volatility and a government which has stood behind many of the measures introduced in the preceding years in support of personal investors. For example, reduced Capital Gains Tax, increased ISA allowances and the introduction of the Lifetime ISA.
Looking at the volatility of the market, it has only moved by more than 1% on 17 days in the last year, and by more than 2% on just one occasion – the 18th April. This compares to David Cameron and Tony Blair’s first years in office which had 84 and 64 days respectively where the market moved by more than 1%. More broadly, the range of the market from its high to its low was just under 15% which compares to 33% in Tony Blair’s first year and 26% in David Cameron’s.
So with a rising, less volatile market, and government support for personal investors there is arguably much for investors to cheer in the first year record of Theresa May as Prime Minister. However, the General Election has undoubtedly served to change this outlook substantially.
Back in July 2016, we at The Share Centre surveyed our customers and found that 81% of personal investors felt Theresa May and Philip Hammond would be good for market confidence and 50% believed that Theresa May, Boris Johnson and David Davis would be able to negotiate a positive Brexit outcome for the UK.
When we surveyed investors again after the 2017 General Election, confidence in the May government had plummeted. Only 22% of personal investors now have confidence that Theresa May will be able to negotiate a positive Brexit outcome and more than 1 in 3 (34%) state that the General Election outcome has made them less confident in making investment decisions.
Two responses to The Share Centre’s latest survey particularly stand out:
- When asked about the balance between tax and spending, 48% now believe the Government should tax and spend more – as compared to 30% who feel the balance is about right and 22% who feel the Government should tax and spend less.
- Investors are concerned about a potential market correction – with 79% of respondents believing the market will fall from its recent highs. 55% believe there will be a gradual fall over a period of time while 24% believe a more significant correction is imminent.
These data points all highlight that the personal investor is feeling markedly less confident and wary of the future following the General Election outcome. It is important that investors recognise risk and take a long term and diversified approach to their investing. A sense of perspective is also required. Indeed, given the performance of the market over the last year, a correction may still leave it ahead of where it was 12 months ago.