Voters will go to the polls on 4 July to choose the country’s next government. Whatever the outcome, I think there are going to be some FTSE 100 winners and losers.
Construction
All political parties appear to agree that there’s a shortage of housing in the UK.
The Labour Party is committed to building 1.5m new homes during the next Parliament. The Conservative Party is promising 1.6m. To trump both, the Liberal Democrats are aiming for 1.9m, including 150,000 social homes and 10 new garden cities.
There are four housebuilders on the index. All of them should benefit from this cross-party emphasis on getting Britain building.
Defence
The FTSE 100 has two defence contractors — BAE Systems and Rolls-Royce Holdings.
Both will be happy to learn that all three political parties are committed to spending 2.5% (currently 2%) of gross domestic product on the military.
The Conservatives have pledged to reach the target by 2030. In contrast To this, the Liberal Democrats state it’s their “ambition” but don’t provide a timescale.
Labour says it will undertake a Strategic Defence Review. Afterwards it “will set out the path” to spending 2.5%.
Other industries
If re-elected, Rishi Sunak is promising to deregulate the financial services sector. This should help the FTSE 100’s five banks, which account for 11.5% of the value of the index.
The Liberal Democrats promise to reverse “the Conservatives’ tax cuts for big banks”.
The party also want to impose a “proper” windfall tax on the “super-profits” of oil and gas producers. What this means is unclear.
Labour has pledged to increase the energy profits levy (windfall tax) on North Sea earnings by three percentage points.
BP and Shell will be disappointed. These two companies make up 12.9% of the index.
Asset sale
In its manifesto, the Conservatives have committed to a “retail sale” of the government’s remaining NatWest Group (LSE:NWG) shares. Based on the bank’s current share price, this could raise nearly £6bn.
The stock trades on a modest forward price-to-earnings ratio of 7.6.
And analysts are expecting it to pay a dividend of 16.72p a share in 2024. If correct, this implies a yield of 5.4%. Of course, dividends are never guaranteed. This is particularly true in the banking sector where earnings can be volatile.
Also, NatWest is heavily focused on the UK, which means if the domestic economy doesn’t grow as expected, it’s likely to have an adverse impact on its earnings and share price.
However, on paper the shares appear cheap. If I was in charge, I’d continue holding on to the stake for a little longer, in anticipation that it will increase in value.
A high-level view
All parties claim they will create the economic conditions necessary for the UK’s biggest companies to prosper.
History tells us (see the chart below) that global events — and longevity of service — have been the biggest factors in determining how the FTSE 100 has performed under each of the country’s Prime Ministers.
Source: author’s calculations
Gordon Brown had to deal with a financial crisis. And Boris Johnson oversaw a pandemic. Both were largely beyond their control.
In my opinion, I believe the FTSE 100 will continue largely unaffected, irrespective of which party wins the election.
Specific policy changes will create some winners and losers. But overall it’s likely to be business as usual.
The post After the general election what might happen to the FTSE 100? appeared first on The Motley Fool UK.
Should you buy NatWest Group now?
Don’t make any big decisions yet.
Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.
And he believes they could bring spectacular returns over the next decade.
Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows…
When such enormous changes hit a big industry, informed investors can potentially get rich.
So, with his new report, Mark’s aiming to put more investors in this enviable position.
Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!
Grab your FREE Energy recommendation now
More reading
Are NatWest shares really the bargain they seem on paper?
Is NatWest still one of the best FTSE 100 shares to buy now? Here’s what the charts say…
Is NatWest one of the FTSE 100’s greatest value shares?
Are NatWest shares a smart buy for passive income?
The government has been selling NatWest shares! Should I buy them for passive income?
James Beard has no position in any of the shares mentioned. The Motley Fool UK has recommended BAE Systems and Rolls-Royce Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
