A year of coalition government
It has now been a year since the formation of the Conservative-led coalition government and Fidelity International have come up with some interesting figures to illustrate how markets have behaved during this time.
Since David Cameron moved into 10 Downing Street a year ago, share prices have increased by 16.6%. This includes the reinvestment of dividends paid during this time.
Compared to historical events, this level of stock market performance bucks the trend.
11 of the 18 parliaments since 1923 have seen negative investment returns in their first twelve months of power for a new Prime Minister.
Winston Churchill was the leader of the last coalition government and equity returns in his first year of power, which coincided with the darkest period of the Second World War, were negative.
The political persuasion of government has had little impact on historic first-year investment returns.
Gordon Brown and Margaret Thatcher share the dubious honour of seeing the biggest negative returns during their respective first years as Prime Minister. Equities fell by 19.1% during the first year of Brown whilst Thatcher presided over a 18.5% fall in the stock market during her first year in Downing Street.
The best period of equities during the first year of a Prime Minister occurred with Edward Heath, who saw markets rise by 26.3% between June 1970 and the following May. Tony Blair is in second place with stock market returns of 25.4% in his first year.
Whilst it is easy to look for correlations between events and investment returns, the two are unlikely to be directly linked. Other factors which are not influenced by the identity of the resident of 10 Downing Street have a much bigger sway over how the markets behave during the first year of a new parliament.
Figures like these always make interesting reading, but investors should continue to focus on their individual goals and objectives when making important investment decisions.
Photo credit: Flickr/World Economic Forum