Originally published at: The week in charts: a transatlantic politics special – InvestEngine Insights
The Budget – market impact
The market’s response to Chancellor Reeves’ budget on Wednesday was mixed. The FTSE 100, an index of the largest UK companies, remained flat after the speech, with larger companies being largely unaffected by the changes.
The AIM index, however, reacted positively. The smaller market had fallen over 6% since the start of this year, partially fuelled by fears over the Labour government removing the inheritance tax relief which had applied to direct investment in companies listed on the AIM.
The chancellor clarified in her budget that IHT would indeed now be applied to AIM shares, but at a 50% reduced rate of 20%. The AIM market reacted positively to this news, rising almost 4% immediately following the speech – expressing its relief at not having the full IHT rate applied.
The bond market was indecisive in its reaction. 10-year gilt yields fell during the course of the budget speech, down to 4.2%, indicating reduced levels of concern about the state of the UK’s finances. However, in the hours following, yield rose up to a peak of 4.4%, as the market digested concerns about extra borrowing, feeding into fears that it could revive inflation and force the Bank of England to abandon their planned rate cuts.
US election
With the US election next week, prediction markets show the race is still too close to call. Both sources available from the Bloomberg terminal, PredictIt and Real Clear Politics, show Trump with a slight edge over Harris, although still well within the margin for error:
It’s worth remembering with all the media hype, which will reach a crescendo next week, that the market doesn’t care who’s in the white house. The chart below shows that S&P returns have tended to remain between 10 and 15% regardless of who the president is or which party they belong to:
It’s also worth remembering that investing according to which party is in power is not a good idea. If you want to express a political opinion, it’s best not to do it with your portfolio:
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