Simon English: Strap yourselves in for the stock market ‘Boris Bounce’

What does the arrival of Boris Johnson at No 10 mean for the stock market? Factors outside the control of the blond bombshell might weigh most heavily, which is another way of saying no one knows, but let’s speculate.

For a start, shares tend to do better under the Tories than Labour. Some (slightly selective) evidence: the FTSE All Share went up 270% under Margaret Thatcher, 107% under John Major, only 19% under Tony Blair, and just 9% during Harold Wilson’s first stint as PM. It fell 19% under Gordon Brown.

Thatcher served longer than the rest of course and Gordon Brown was rather biffed by the global financial crisis that I suppose we’ll have to concede wasn’t entirely his fault.

Blair copped the bursting of the tech bubble in the early 2000s, which I’m sure he must have been to blame for in some way, but the effect was to dampen shares even while the economy buzzed along.

Under Boris, assuming he lasts long enough to register a score, the temptation must be to say that the economy is cooling, perhaps heading for a recession, and equities will probably suffer.

But two things: a) there isn’t always a direct correlation between the economy and the stock market. And b) let’s be optimistic.

Simon French at Panmure Gordon reckons UK equities are 20% below where they would be if Brexit uncertainty was removed. So if Boris gets Brexit through Parliament in an orderly fashion you could see a big double-digit return on the FTSE in very short order. The word “if” is doing a lot of heavy-lifting just there, I’ll grant you.

More from French: “Should Boris turn out to be more fiscally loose than May/Hammond, then the domestic sugar rush of demand, if VAT or stamp duty cuts come in, will see builders, retailers, leisure companies all rally. These have been dogs recently so that would be a welcome rebound.”

Russ Mould at AJ Bell offers the view that a Johnson government is likely to interfere with big business less than others have. “The May administration took a particularly interventionist stance when it came to gambling, smoking, utility bills and sugary drinks,” he says. “Investors will be waiting to find out whether Mr Johnson will continue with this or take a more laissez-fare approach — stock markets would favour the latter.”

Indeed they would.

Time to show some love for equities

Even if the new PM pursues a no-deal or forces a General Election, it doesn’t follow that shares will crash. Companies with foreign earnings, that’s much of the FTSE 100, would be in demand as a cushion to domestic turbulence, so it’s perfectly possible that big stocks will rise even if the economy falls.

And if you think that UK PLC is presently a trashed stock it ought to be a buy in any case, assuming you’ve the stomach to sit out a few jitters.

Lastly, Johnson’s talk of optimism and can-do spirit might be more than political posturing, it could actually make a difference.

Specifically, he could be a cheerleader for businesses wanting to be based in the UK or to list on the London market.

At the moment, the tendency for large companies is to shift jobs away from here and to go private rather than public.

The lack of new listed entities is becoming a problem and needs treatment. If all big companies decided the stock market was too much trouble and chose to avoid its glare, there would be no shares to buy in the first place.

Boris could provide incentives to stay or go public. He could lead off with Royal Bank of Scotland, finally cashing in the Government’s huge stake, albeit at a loss, and splash the cash around.

He could privatise some government entities — how about Channel 4, the Land Registry and Companies House for starters?

And he could sell the shares to voters at heavy discounts, sparking renewed and wider interest in stock markets.

In short, he could show buyers of equities a bit of love. If he does do that, there’s a clear way to bet.