3 minute read

The UK Snap Election: Theresa’s Genius Move

Certainty: A Market    3 minute read

The UK Snap Election: Theresa’s Genius Move

A Political Genius

Theresa May has announced a snap election for the 8th of June 2017. Surprising party leaders across the country, May’s decision to truly honour the wishes of her constituents is a fair embodiment of the word democracy. Though, this election is heavily skewed in favour of May as she had the opportunity to prepare for weeks, even months for the actual announcement meaning she could launch her campaign as soon as she finished her speech. By holding an election, she is both; showing that she isn’t afraid of her competition, and has gained the support of the public.

Current Poles*

Con: 45%

Lab: 29%

LD: 10%

UKIP: 7%

Other: 9%

As of April 26th, The statistics clearly show that even though the downside for a snap for May, potentially could have been big, the upside; ethically and politically, were much greater.

Brexit Negotiations Strengthened

With Article 50 being invoked, the year is set where Britain will exit the EU. In 2020, there would be a new general election which would result in a new government taking over the final negotiations. Having the political certainty of knowing the intentions of Brexit would be fair to voters, alternatively having to hold a new election later would mean that the intentions of the government (current) which invoked Article 50 would not be adhered to. Perhaps allowing for a shift from a ‘Hard Brexit’ to a ‘Soft Brexit’, this would essentially give the people one more opportunity to show what kind of Brexit they wanted after the reality of leaving the EU was realised.

Given that Article 50 has never before been invoked, there is a significant amount of uncertainty looming over already. Therefore certainty is a privilege and should be taken whenever possible.

Market’s Response to a Snap Election

After May announced the Election markets soared, strengthening the pound, this would give May yet another advantage in having a ‘Soft Brexit’. If markets continue with the same pattern, the effect of Brexit might be rendered redundant, or in other words, Brexit may have minimal effect on Britain’s economy.

Volatility means that the opportunities for making a profit in the markets increase exponentially. Activity in options markets suggests forex traders are not affected by the snap election, but the same cannot be said for equity traders. This is partly because the global economy has a substantial amount of uncertainty due to geopolitical stresses across the globe. The FTSE 100 Volatility Index has climbed 9.6 per cent to 16.17, its highest in five months. The sterling/US dollar volatility gauge which includes the snap election is up to 8.78 though over the past year the average has been 11.25. The gauge reached its highest value just before the Brexit vote, above 18.

What Does the Future Hold?

With uncertainties over a lot of factors dominating the markets, the ability to predict the general trend lies with few. You can be sure that the public is less sure about a Hard Brexit, with the reality of leaving the single markets hitting the general population. Noticeable effects of Brexit are seeping into day to day lives which will only increase with time.

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