By Mark Newman
The Conservative Party voted in a new leader on 23rd July 2019. Boris Johnson was announced, beating Jeremy Hunt by 92,153 votes to 46,656 (66.4% to 33.6%). This was only slightly less than the margin by which David Cameron won the leadership race against David Davis in 2005 (68%-32%). Nevertheless, this outcome was widely expected and anticipated by the markets.
In June, Neil Woodford (one of the most reputable UK fund managers) announced the suspension of withdrawals on his flagship Woodford Equity Income Fund. The listed £3.7bn investment fund (which was as high as £10b in April 2017) run by Neil Woodford will remain suspended at least until December, according to the company managing it. Prosperity’s investment committee has not advised on the purchase of this fund and we have no clients within our portfolio that purchased this fund under Prosperity.
According to AXA Investment Managers, Financial markets saw little reaction with Johnson’s announcement which for a long time was the presumptive winner of this contest. 2-year and 10-year gilt yields were unchanged at 0.48% and 0.70% respectively.
However, the Sterling fell to its lowest since April 2017 in July on the back of continued BREXIT uncertainty, and with Johnson open to an ultimate no-deal the immediate future of the Sterling will remain unsettled.
The FTSE 100 has risen nearly 2% since the announcement – but this came across broad-based equity gains, with the Euro 300 index also up over the same period. The FSTE 100 today (31st July) stands at the same value as 1st August 2018, so one could argue a flat year (ex-dividends) for growth which was widely expected, and generally positive in current conditions.
Johnson’s Brexit position is the most important for future markets, but for now remains a mesh of inconsistencies. This works as a campaigning/negotiating position but will unwind in October. We continue to expect an extension of Brexit beyond 31 October.
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Performance from 01/01/19 to 25/07/2019, in GBP. Source: Factset, AXA IM
All of the index data is based on a total return basis
Source: AXA Investment Managers report https://adviser.axa-im.co.uk/en/home?utm_medium=email&utm_source=lm-uk-na-ra-na-en-markt-t2-20190403-na-na&utm_campaign=na_uk&utm_content=take2_uk