New Telegraph 
After a historic election night for British politics, there was one word that investors in the City of London kept using to characterise their hope for the next era of UK markets: stability. Money managers said they expected the Labour Party under Keir Starmer would usher in calmer and more moderate policy, turning the page on years of turmoil marked by the gilt crisis, Brexit and the Scottish referendum. Asset prices reflected that mood on Friday, although with modest enthusiasm given the election result had long been expected.
The pound climbed for a seventh day, its longest winning streak in four years, to touch a three-week high and trade around $1.28. The FTSE 100 Index added 0.3 per cent, with homebuilders among the best performers. The UK now stands in contrast to France, where the political system has been thrown into chaos by the rapid rise of Marine Le Pen’s farright party, and the US, where President Joe Biden faces intense pressure to give up his reelection campaign.
“I wouldn’t underestimate the benefit that UK assets are going to see from just having a period of stability in terms of government and policy making,” said Dean Turner, economist at UBS Global Wealth Management. “There’s always been a sense that there’s this discount around the UK given the high degree of political uncertainty. Now that’s been removed, investors can just focus on some of the more fundamental attractions,” Turner added. The UK’s transformation in the mind of investors can be most clearly seen in the pound.
The currency has been the best performer across the Group-of-10 this year, bolstered by higher interest rates and the prospect of a slow and shallow easing cycle from the Bank of England. A gauge of expected price swings on sterling over the coming month fell to 5.76 per cent this week, its lowest since May.
In addition, British government bonds are closer to becoming a safe-haven asset, according to Monica Defend, head of the Amundi Institute, who said the UK is scoring well on inflation and fiscal dynamics. In her view, gilts are a better bet for investors over US, German and French debt. “A re-rating is merited and would be a big turnaround after the volatility seen during the years of UK political uncertainty,” she said.
