An election victory for David Cameron is best for the markets say City Index clients

With the 2015 general election too close to call and likely to drive uncertainty in the markets going into May 7th polling day, we surveyed City Index traders to gauge their thoughts on the election and its potential effect on the UK economy and financial markets.

Here are the three questions we asked our clients, together with their responses…

Which political party is best for the UK economy?

As you can see from the chart below, the majority of City Index customers believe that a Conservative government would be the most beneficial for the UK economy.

This matches sentiment from many business leaders that a Conservative government would help to continue to drive debt as a proportion to GDP down and balance the budget deficit, in line with a key goal five years ago. This would help to satisfy the UK’s creditors and attract more investment into the UK as a safe financial hub in which to do business.

Which party do you think will be best for the UK stock market?

Once again, early murmurs from business leaders have focused on the one clear benefit of a Labour government, which would be to maintain the UK’s status quo with Europe.

Labour is pro EU membership and so wouldn’t create uncertainty around the stability of Britain’s EU membership. On the other hand, a Conservative government, which has promised an EU referendum by 2017, or a coalition in which

UKIP plays a role (either formally or informally) would create uncertainty that could hurt investor confidence and risk appetite.

However, the results from our sentiment survey suggest that City Index clients are not worried about a UK exit from the EU.

This suggests one of two things, either they have confidence that any referendum would result in a vote against leaving, or that an exit wouldn’t be overly detrimental to the health of the UK’s business and stock markets, given the fact that the idea of a referendum has been entrenched in market sentiment for some years.

For more information on the possible outcomes of the vote, you can read Josh Raymond’s article here.

Which party leader do you think would make the best Prime Minister?

Perhaps given the answers to the two questions above, the result from this final survey question isn’t much of a surprise. But it does suggest clear correlations between the City Index client base as a demographic and Tory voters.
A large portion of traders from the client sentiment survey felt that David Cameron would be the best choice for UK Prime Minister.

This could be explained by the fact that the Conservatives have a stronghold in wealthy constituencies in South East England and in London particularly, where a high number of City Index clients are located.
Another client stat, which may also feed this potential correlation, is that the most common occupation among our clients is Director, so we can assume a position of high responsibility within a business, hence the pro-business nature of the voting.

This article is based on April’s City Index client sentiment survey. On average, the survey had a 2.8% response rate, giving the results a 93% level of confidence (based on a margin of error of +/- 8%).