Understandably, the topic on many people’s minds is elections. Given the UK General Election on the 4^th of July, we have been getting asked more frequently how any result is likely to impact investment markets, and therefore an investment portfolio.

We know uncertainty leads to volatility in investment markets. Investment markets are forward-looking hence known information is reflected in stock prices rapidly.

So what is priced in at present? Well, bookmakers have a Labour majority at 1/20 odds and a Conservative majority at 150/1 odds. With odds like this in betting, you can see where the consensus is heading. Investment markets have priced in a likely Labour majority already. As with any election, some volatility in the run up to polling day and the days after is expected, with more if unexpected results come to pass. However, as we have always advocated at Eldon, looking through short term volatility at the longer term returns is more important to your Financial Plan.

Looking back at historical elections, it is hard to pick out any particular trend in what the stock market has done, however the most relevant appears to be 1997, when a comfortable Labour win was widely expected at the time. However in all instances, an election that had a likely majority tended to result in more favorable market performance.

Year	FTSE 100 in 6 week run up	Outcome
1987	+9.70%	Thatcher win widely expected. British shares performed very well.
1992	-4.90%	All polls predicated a hung parliament. Nerves in the market led to a selloff. Conservatives won by a small majority.
1997	+4.39%	Polls showed Labour to win comfortably. Shares perfomed well with markets confident. Labour won by a landslide.
2001	+1.36%	Polls indicated a Labour win throughout the 18 months beforehand.  Markets up. Labour retain. Dubbed a “quiet landslide”.
2005	-0.41%	Polling was much tighter than previous election. Markets stayed relatively flat. Labour retained a small majority.
2010	-8.15%	By April the race was too close to call. Markets retreated due to uncertainty. Hung parliament.
2015	-0.12%	Polls indicated it would be the closest election in history. Markets stayed flat. Conservative won a surprise outright majority.

What often occurs through periods of volatility, particularly after significant daily drops, is that we see significant daily increases too. Ahead of time, it would be great to be able to pick and choose the days spent in the market, avoiding the downs, yet being invested for the ups. In reality, we know this just isn’t possible.

As ever, we come back to the adage that it’s “the time spent IN the markets, rather than trying to time the markets” that will reward investors in the long term. It’s important to remain disciplined through periods of volatility, should they occur over the remainder of this year, particularly with a US Election due in November too.

As part of this, investors need to ensure they are taking an appropriate level of investment risk in a well-diversified portfolio, resulting in a level of volatility they can tolerate from an emotional perspective (as well as financial) in the pursuit of returns over time.

So, although a General Election may cause some volatility (but also may not), there’s no reason to panic or make knee-jerk changes in light of this. Sticking to the long-term view is far more likely to benefit your Financial Plan.

The government has announced that it will put legislation in place to allow parents and carers to apply for National Insurance Credits where they have not claimed Child Benefit, to ensure that people do not miss out on their State Pension entitlement.

In most cases, you can get a full State Pension if you have 35 qualifying years of National Insurance contributions, and you need a minimum of 10 qualifying years to receive any State Pension entitlement. One way to earn a credit other than through employment or making voluntary contributions is by claiming Child Benefit. This means a parent or carer can be credited with National Insurance Contributions until their youngest child is 12, even if they are not earning.

Child Benefit payments are received tax-free as long as neither parent earns more than £50,000 a year. However, if earnings are higher than this, some or all of the Child Benefit will need to be repaid in an extra form of Income Tax known as the ‘High Income Child Benefit Charge’.

In April last year, the government recognised concerns that some eligible parents who had not claimed Child Benefit, often to avoid the High Income Child Benefit Charge, could miss out on their future entitlement to a full State Pension. The government said the issue would be addressed to ensure that those affected are not disadvantaged due to not claiming Child Benefit.

HMRC said legislation will be brought forward and will allow individuals to claim this credit from 2026, and eligibility will be closely based on the criteria for receiving Child Benefit. The credit will add qualifying years of National Insurance where eligible, which will support future State Pension eligibility. Transitional arrangements will ensure those affected since 2013 are still able to claim.

Going forward, applications will be available for 6 years following the relevant tax year and the government plans to bring forward secondary legislation as soon as possible.

You can read more about checking your State Pension entitlement here.

The end of 2023 saw positive news in markets, despite experts predicting doom and gloom for the economy at the start of the year. Inflation came in lower than expected and markets speculated that major central banks could cut interest rates through 2024. The Federal Reserve Bank set the table for as many as 3 interest rate cuts through 2024, whilst the Bank of England awaits further evidence that inflation will fall to the 2% target, and stay there, before lowering rates.

With many commentators suggesting that markets may be too optimistic about rate cuts this year, it is clear that the path to falling interest rates remains uncertain; both this and inflation will continue to dominate markets in the short term. So, what does this tell us about what we can expect in the coming months? The truth is nobody knows!

It is not possible to predict the short-term direction of markets and we can never know when they might fall suddenly, whether rallies will continue, and how long they will go on for, despite what headlines might say. Uncertainty in markets causes volatility and, as you might expect, the main factors that contribute to uncertainty are unknown events that cannot be predicted.

So, what does matter? We know it is important as Financial Planners to ensure that our clients are happy with the amount of investment risk they are taking within their invested portfolios. When we talk about risk, we generally mean the level of volatility within the portfolio, rather than the risk of losing all of your money. It’s really important to make sure this is ‘right’ for you as this, as well as maintaining a comfortable cash reserve, can make the difference between being able to accept market movements or not.

No matter what the forecasts are for the months ahead, our philosophy remains the same at Eldon – remaining invested in a well-diversified portfolio, appropriate for your circumstances, risk tolerance, and long-term goals, is what will ultimately lead to a much better outcome from an investment perspective, rather than trying to predict the short term and the unknown.