Bullish UK retail investors predict change in government will boost UK stocks

• 44% of retail investors believe Labour win will push UK stocks up vs 30% who say opposite
• Whilst Labour voters are far more likely to hold this view, 25% of Tory voters agree
• Positive sentiment extends to economy, 42% feel confident about UK, up from 33% in March
• Despite confidence in market, UK investors twice as likely as global peers to be prioritising cash assets

Bullish UK retail investors are predicting that a change in Downing Street will boost the UK stock market, according to data from the latest Retail Investor Beat (RIB) from trading and investing platform eToro.

 
In eToro’s quarterly study of 1,000 UK-based investors, participants were asked whether they expected a change in government to be positive or negative for UK stocks, with investors almost 1.5 times more likely to believe it would be a positive catalyst (44% vs 30%).

This optimism is most pronounced amongst younger investors, with almost two-thirds (64%) of both 18 to 34 and 35 to 44 year olds believing a change at No. 10 will boost UK stocks vs 23% and 15% respectively who say the opposite. This sentiment was shared by just 29% of over-55s, the only age group more likely to think a new government would be a negative (39%) for the market.

Whilst Labour voters are unsurprisingly most likely to believe a change in government will be positive rather than negative for markets (68% vs 13%), the response from Conservative voters was more split (25% positive vs 56% negative) though still firmly on the negative side.

Dan Moczulski, UK Managing Director at eToro said: “When Labour won power in 1997 the FTSE 100 rallied by 35% over the next 12 months. Whilst we’re unlikely to see anything quite so dramatic this time around, the FTSE 100 has already returned 7% so far this year, indicating that markets are comfortable with the expected outcome of this election.  

“With inflation, UK stocks, and sentiment beginning to turn a corner, the mood music is clearly right for investors heading into this election. This gives the government, whoever they are in a week’s time, a real opportunity to seize the moment and drive a meaningful cultural shift to get people investing.” 

With the election just a week away, the UK’s growing population of retail investors are also feeling more positive about the wider UK economy, with 42% feeling confident versus 33% three months ago.

Despite more positivity towards the UK market, the RIB also revealed that British retail investors remain more cautious than international peers when it comes to putting their money to work.

When asked which asset class they were most likely to increase their investments in, cash was by far the UK’s most popular choice at 25%, followed by crypto at 11%. The percentage of Brits who plan to prioritise cash over other asset classes is almost double the international average (14%) and is the highest proportion amongst the 12 countries eToro surveyed. By contrast, fewer investors are prioritising UK (8%) or foreign stocks (10%), despite strong recent performance for equity markets and the prospect of imminent rate cuts.

Moczulski added: “High interest rates have made cash savings an attractive choice lately, and the current uncertainty over the future of Capital Gains Tax could also be making some think twice about future investments. Yet history shows that a diverse stock portfolio comfortably outperforms cash in the long run. And with rates set to start coming down soon, we would like to see whoever is in government after July 4th highlight the importance of putting cash savings to work in the markets. Wealth creation and revitalising the UK market need to be high on the agenda, and incentivising and promoting investment in UK stocks would contribute to both goals.”