On the whole, the UK election campaign has not been a major focus for investors.
Sterling has remained in a fairly tight range and has traded up to its highest level against the euro in over two years. Gilts have also largely been unmoved, suggesting little risk premium is attached to a change in government.
That could be because polls have consistently put Labour about 20 points ahead, with YouGov’s latest poll suggesting they are on track for the biggest majority since 1832, the year of the Great Reform Act.
Labour has claimed that its promise of stability makes it the truly pro-business party. It has also pledged to stick to the same fiscal rules as the Conservatives, suggesting there is little danger of a fiscal meltdown.
“The UK election appears to have fallen down the pecking order for the market, usurped by focus on the French and US ballots,” analysts at Deutsche Bank wrote.
“A large Labour majority is very likely to already be priced in, given how little the polls have moved over the course of the campaign,” they continued.
Francesco Pesole, an FX analyst at Dutch bank ING, said he “struggled to identify major risks for the pound heading into today’s vote”.
There was even less interest elsewhere. “Without there being much of a contest, the upcoming vote on July 4th seems to be generating about as much excitement as the country’s football team,” Mark Dowding, Bluebay CIO, RBC Bluebay Asset Management, said.
The predictable election in the UK stands as a striking contrast to the ongoing election in France and the looming presidential election across the Atlantic.
Centrist and left-wing parties in France are doing their best to prevent Marine Le Pen’s National Rally from securing an overall majority in the parliamentary elections while internal dealings continue over Joe Biden’s future.
Markets seem to prefer the UK’s relative political stability. Fund managers surveyed by Bank of America in June said the UK was now their most favoured European equity market.
While analysts at Capital Economics said UK assets could benefit from political and fiscal stability, particularly compared to France and potentially even the US.
“It feels odd to say it, but we may be entering a period during which the UK becomes a beacon of political and economic stability,” Alex Kerr, assistant economist at Capital Economics said.