Ready to blow!

The FTSE All-Share index has been more volatile over the past year than during any other post-election period since 1987, research has found.

The Share Centre, the broker, has totted up the number of times the index either gained or lost 1 per cent in a single trading session.

It found that over the past year, one year on from the general election, this has occurred on 87 occasions – much more often than in other post-election periods.

The broker carried out the same exercise looking back at recent decades. It analysed the previous six governments, stretching back to 1987 when Margaret Thatcher won a landslide victory to become prime minister for the third time.

ECONOMIC CONCERNS

Concerns over the health of the global economy, including China, have been one of the main reasons behind the high levels of volatility over the past 12 months. This, in turn, has unsettled investors, who since the start of the year have been reducing their exposure to equity funds.

Over the past year the FTSE All-Share index has lost 8 per cent.

Year of general election Prime minister elected
Political party No. of days where market moved by >1% (+ or -)
No. of days where market moved by >2% (+ or -)
2015 David Cameron Conservative 84 24
2001 Tony Blair Labour 74 19
1987 Margaret Thatcher Conservative 72 24
2010 David Cameron Conservative 69 17
1997 Tony Blair Labour 64 9
1992 John Major Conservative 45 7
2005 Tony Blair Labour 17 1

But it is not all doom and gloom. Other post-election periods have been worse. In 2001 for instance, when Tony Blair was re-elected, the index fell by 17 per cent in his first year following the tech bubble popping.

EXCepTIONAL YEAR

Another less rosy post-election period for markets occured in 1987, when the index lost 11 per cent. Most of the losses came in October of that year, when Black Monday sent stock markets around the globe into a spin.

Year of general election Prime minister elected Political party Performance of FTSE All-Share in first year (%)
1997 Tony Blair Labour +32
2005 Tony Blair Labour +28
1992 John Major Conservative +19
2010 David Cameron Conservative +14
2015 David Cameron Conservative -8
1987 Margaret Thatcher Conservative -11
2001 Tony Blair Labour -17

Richard Stone, chief executive of The Share Centre, adds: ‘The data shows that 2015/16 has been an exceptional year and it is hardly surprising that investor sentiment and activity has been relatively weak.

‘Investors have had to face into a falling market, trading in a narrow range but with high volatility, in other words high risk. With the market lacking direction but risk high, many investors have chosen to sit on the sidelines.

‘We hope that some of the uncertainty driving these market characteristics will lift during 2016 and investors’ confidence will return, enabling them to take advantage of the many positive steps the government has taken to encourage them in their endeavours.’

SOURCE: www.moneyobserver.com