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The winners from Boris Johnson’s resignation – TAM Asset Management

Written by James Penny, chief investment officer at TAM Asset Management following Boris Johnson’s resignation.

What sectors could be winners, which could be losers?

Clear winners from Boris Johnson’s resignation might not be immediately apparent until a successor is found.

Having said that, it’s likely his successor will have a softer stance to Europe and Brexit negotiations, boosting positivity around UK domestic businesses found in the mid and small cap areas which have been battered as of late.

This could be further boosted if the successor manages to right the UK ship and thus stabilise the pound, which would boost domestic businesses in the FTSE 250 and AIM.

Listen to our #LCAW2022 IFAtalk podcast with James Penny here!

Overall what will this mean for the UK economy and the pound? 

The UK economy will always respond positively to a firm hand on the tiller of the country, so this is only a benefit for the economy and its prospects as we head into a time of economic contraction.

The crossroads of inflation and the cost-of-living crisis are also likely to be more clearly managed going forward. Both of these should boost the pound and boost domestic asset prices.

The overarching caveat is the UK is ostensibly a lot closer to an economic recession than many other developed nations, so the storm clouds on the UK market are far from dissipating. However, this development is undoubtedly positive for the UK market, the UK economy and its voters.

What should investors look out for over the next few months? 

Expect a lot of political wrangling from candidates jostling for pole position. This will likely mean increased media speculation and plenty of promises to UK voters from candidates on how they are going to make life in the UK better.

Inflation, employment and GDP growth – or contraction – will continue to dominate the market as we see a potential floor getting built into the pound.

Should inflation begin to dissipate then one can reasonably expect more strength in gilts and more positivity in domestic stocks. However the real catalyst for UK stock performance will be in the international market coming back to UK businesses and this change of leadership can only be a boon to that endeavour.

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