The Labour Party has won the UK general election - not a surprise given the polls consistently showed them as the favourites.

There have therefore been no dramatic shifts in markets as a result of the news this morning (Friday, 5 July), largely because it was already priced-in by markets. UK government bonds have fallen very slightly but appear to have stayed calm, while sterling has remained steady against the US dollar. As for stock markets, the FTSE 250, which consists of domestic UK stocks, reacted positively and the FTSE 100 rose slightly. 

Policy changes and what a Labour government means for the economy will take time to materialise as it is unlikely any immediate changes will be made. Future policy changes, such as those mentioned in the party’s manifesto, will still need to go through the rigorous process of discussion and debate by MPs before getting approved by Parliament. And organisations like the Office for Budget Responsibility will be keeping a close eye on any financial impact.

Fahad Kamal, Chief Investment Officer at Coutts, the team behind NatWest Invest and our other investment options, said: “In terms of what this means for the UK population and our clients, we will closely monitor the developments of a Keir Starmer government and its potential impact on markets.

“It’s worth noting, though, that history shows elections generally don’t tend to have a long-term impact on markets. They can create short-term shifts, but investors usually get past that and re-focus on fundamentals such as company earnings, employment and economic growth.”

It’s always worth remembering that past performance should not be taken as a guide to future performance. The value of investments, and the income from them, can fall as well as rise, and you might not get back what you put in. You should continue to hold cash for your short-term needs.

Coutts takes a global approach within its funds and portfolios. When making tactical decisions, the team takes into consideration key economic fundamentals that influence financial markets such as inflation, interest rates and corporate earnings.

With markets unsurprised by the election result, the experts at Coutts do not see any imminent disruption for investors, and are not making any changes to their positioning in response.

Despite the election, it appears to be a case of ‘business as usual’ for the UK, said Fahad.

“An ongoing recent trend has been falling inflation, which even dropped to the Bank of England’s (BoE’s) target of 2% last month,” he said. “We believe it will remain broadly in line with that target over the rest of this year.”

As a result of this, while the BoE held interest rates at 5.25% for the seventh time in a row last month, there are strong expectations we’ll see rate cuts soon. This could, over time, improve the country’s economic growth as it encourages people to borrow and spend rather than save.