Goldman Sachs thinks money will pour into UK stocks and shares after this election, but it’s at least partly because they suspect a Tory victory.
Regardless of which side of the Brexit divide you are on, there is one thing that’s for certain: business has been extremely cautious about the political situation. However, if we are to believe the financial wizards at Goldman Sachs, things could be about to change.
The investment bank is urging investors to buy British shares, because they predict a big economic bounce as we head into 2020.
The firm’s economists upgraded growth forecasts for next year, mainly due to the reduced threat of a no-deal exit from the EU, the prospect of some finality to the Brexit debate, and also the higher levels of public spending that have been promised by both political parties.
A spokesman told The Times: “Clarity on the UK’s terms of exit should emerge faster under a Conservative government than a Labour government, although a Labour administration would introduce a plausible path to Remain.
“Second, a sizeable fiscal impulse is on the horizon. Both parties plan to increase government spending substantially, with Labour proposing a larger increase in public-sector investment than that envisaged by the incumbent Conservative administration.”
But they’re not just talking about the economy holding onto its hat, they’re talking about proper growth. The bank’s forecast specifically predicts a growth rate of 2.4% in the second half of next year, and a growth rate of 2% in 2021, which is significantly more than the 1.6% they had previously suggested.
This would of course be a fantastic result for every British business: a booming economy will lift up every SME in the land.
A lot of this economic growth will be driven by consumer activity once the public feel a bit more confident of the future, but the report reckons there is around $150bn (£113bn) of investment sitting poised to pour into UK company shares if things work out well post-election.
This has been a tricky period for investors to get their heads around: on the one hand, a Corbyn government would mean higher corporation tax and the minimum wage rising substantially, but on the other, with the Conservatives we are set almost certainly to leave the European Union, which businesses groups have been saying for years now would be harmful to them too.
I suppose we will soon know what the outcomes to all of these issues are, since it is election day today. As I mentioned the other day though – watch the pound, that will tell you what money markets predict for our future prosperity once this election is over.