Fixed income
13 Dec 2019 | By Lloyd Harris

Johnson’s gamble pays off

The UK electorate has rejected hard-line left-wing politics and voted for free market capitalism.

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The UK electorate has rejected hard-line left-wing politics and voted for free market capitalism.

The election called to provide certainty, has done just that. Boris Johnson has won with a Conservative majority which should help settle UK politics for the next five years. For the first time since the peak Blair years, the UK economy can be genuinely unshackled.

Investors in those sectors that Jeremy Corbyn and Labour had targeted in their radical manifesto will now be breathing a sigh of relief as the threat of nationalisation falls away. In addition, with a further Scottish independence vote unlikely in the near term, regardless of the strength of the SNP’s showing, this will be well received by Scottish corporates.

Gilts investors will be relieved that the spectre of vast issuance of debt from a prospective Labour government is put well over the horizon. This should keep borrowing rates in check for UK plc and will be good news for mortgagees across the country.

The UK will now be leaving the EU. This process could well bring uncertainty in due course but for now, we expect the certainty of a Conservative majority to be supportive for credit spreads, and in particular for UK financials and utility companies.

 

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