U.K. Domestic Banks Spike After Tory Triumph

December 19, 2019 | Nicole Johnson-Barnes, CFA, Senior Research Analyst, Global Equities

In what has been called a landmark victory, Prime Minister Boris Johnson and the Conservatives handily defeated their Labour party opposition in the Thursday, December 12th U.K. general election, winning 364 of the 650 Parliament seats. This landslide gain locks in a Tory government majority, which should enable Johnson to fulfill his campaign pledge to “Get Brexit Done.” The win also provides the broader market with greater certainty about the direction of Brexit, as Johnson will now have the votes necessary to complete the steps needed to make the existing divorce deal law and to take Britain out of the European Union by the end of 2020.

Brexit has been a major overhang on U.K. stocks, as evidenced by the FTSE 100 being the worst performing European Index year-to-date. In this chart of the week, we show the London stock market response to the election results. The FTSE 100 Index rallied on both the Friday and Monday after last week’s election, up 1.1% and 2.3% respectively based on closing price. In intraday trading on Monday, December 16th, the U.K. blue-chip index surged to its highest level in four months, up nearly 2.7%. Of note, those businesses acutely impacted by the domestic U.K. economy saw a meaningful boost. British financial service firms were among the major climbers during the rally, with Hargreaves Lansdown, Barclays, and Lloyds Banking Group (shown in the chart) up over 4%.

Print PDF > U.K. Domestic Banks Spike After Tory Triumph

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Nicole Johnson-Barnes, CFA
Senior Research Analyst, Global Equities

Get to Know Nicole

Related Content

Scatter chart showing correlation of 10-year Treasury Yield and Correlation of Treasury Yield vs. S&P 500 Return. Chart subtitle: Rising rates have a bigger impact on equities when Treasury yields are much higher than they are today. Chart description: Y-axis shows Rolling 1-Year Correlation: Monthly Change in Treasury Yield vs. Monthly S&P 500 Return, ranging from -1 to +1. X-axis shows 10-Year Treasury Yield from 0-18%. Two series are scattered: Before the Global Financial Crisis in brown and After the Global Financial Crisis in orange. There is some slight overlap of the two around the 3-4% Treasury Yield mark, but otherwise the majority of the Pre-GFC series is to the right of the 4% yield mark and ranges across the x-axis for the full -1 to +1 correlation. The Post-GFC series is primarily above the x-axis, though there are some below, and in the first 4% of yield. March 31, 2021 is highlighted at a correlation of 0.299 and the Treasury yield at 1.74%. Chart source: Source: Bloomberg as of March 31, 2021. Pre GFC: December 1970 – August 2007. Post GFC: September 2007 (FOMC began reducing the federal funds rate) – March 2021.

05.04.2021

When Do Rising Rates Matter the Most?

The first quarter of 2021 saw the 10-year Treasury yield nearly double, which had a profoundly negative impact on growth-oriented…

Combined area and line chart showing SPAC deals and gross proceeds since 2009 by year. Chart subtitle: 2021 has already seen a record number of SPAC deals and gross proceeds. Chart description: Left Y-axis shows Gross Proceeds in $ Billions, ranging from 0-1,200. X-axis shows years from 2009 to 2021 as of April 28. Right Y-axis shows IPO count from 0-350. Gross proceeds in area is minimal from 2009 to 2014, with steady increase from 2014-2019 and a huge jump in 2020 ($83B) and 2021 ($100B). Line of IPO count follows similar trend (2020: 248 IPOs, 2021: 308 IPOs). Chart source: SPACInsider as of April 28, 2021.

04.29.2021

What’s Next for SPACs?

The ferocious appetite for Special Purpose Acquisition Companies (SPACs) continued its momentum throughout the first quarter of 2021. Investors could…

04.26.2021

One Year Later, What’s Next?

Welcome to our inaugural quarterly client newsletter! As a way of introduction, I am Greg Leonberger, Director of Research here…

04.08.2021

Q1 2021 Market Insights Video

This video features an in-depth analysis of the first quarter’s performance by Marquette’s research analysts and directors, reviewing general themes…

Two charts showing changes in private equity add-on acquisition activity. Chart subtitles: Left reads, "Add-on acquisitions have increased as a share of buyouts," and right reads, "Add-on acquisitions no longer increase holding periods." First chart description: Combined stacked columns and line chart. Left y-axis for columns shows Deal Count, ranging from 0-5,000. X-axis shows years 2002-2020. Right y-axis for line shows Add-Ons as a % of Buyouts as range of percentages from 0-80%. Line has steadily increased since 2002, from 43% to 72% in 2020. The total number of Deals has increased significantly; each stacked column shows deals that were add-ons and were not add-ons which, with add-ons also steadily increasing. Second chart description: Line chart. Y-axis shows Median Years to Exit. X-axis shows years from 2006-2020. There are three lines with the following category labels: 0 Add-ons; 1-4 add-ons; 5+ add-ons. In 2006, the 5+add-ons category was near 7 years holding time and the 1-4 add-ons category and 0 add-ons categories were near 4, but in 2020, all three categories were all very close to 5 years. Chart source: Pitchbook as of December 31, 2020.

04.21.2021

PE Pursues Buy-and-Build

Add-on investments, a company acquired by a private equity firm to be added to one of its platform companies, have…

Line chart showing U.S. Dollar Index (DXY) in tan and MSCI EM Local Returns in purple. Chart subtitle: MSCI EM Local Currency returns are negatively correlated with the U.S. dollar Chart description: Left Y-axis shows DXY Index range from 80 to 105. Right Y-axis shows MSCI EM Local Cumulative Return range from -30 to +50%. X-axis shows dates from January 2018 to present, in quarterly increments. Correlation of the two lines is generally very aligned; when the dollar line goes up, EM goes down and vice versa. In late March 2020, the dollar spiked to its highest level shown in the chart (102.5) and EM returns dropped sharply (-22.6%), but both have reversed since then, crossing several times in the fall, and now EM is up (32.9%) while the dollar is down (92.1). Chart source: Bloomberg as of April 12, 2021.

04.13.2021

Weak Dollar, Strong EM

For U.S.-based investors, the movement of the dollar has a direct and indirect impact on emerging market equity returns. The…

More articles

Subscribe to Research Email Alerts

Research Email Alert Subscription

Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.

We respect your privacy. We will never share or sell your information.

Thank You

We appreciate your interest in Marquette Associates.

If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.

Contact Us >