Following Starmer’s resignation, new analysis from IG shows that UK equities have typically bounced in the week following a prime minister’s resignation, regardless of whether markets initially rose or fell on the day of the announcement.
Will we see another resignation FTSE bounce? FTSE 350 has averaged 1.5% gains in week following last three PM resignations.
UK equities have bounced in the week following recent prime ministerial resignations, regardless of the market’s initial reaction on the day, according to analysis from investing and trading platform IG.
Analysis of the departures of Theresa May, Boris Johnson and Liz Truss shows the FTSE 350 moved between -0.74% and +0.74% on resignation day, but was higher one week later in all three cases, with gains ranging from 0.85% to 2.40%, averaging 1.51%.
The pound’s reaction has been less consistent. Sterling weakened by 2.29% against the US dollar in the week following May’s resignation announcement, but gained 1.53% after Johnson’s departure and 1.70% after Truss resigned.
“Markets generally dislike uncertainty, but history suggests investors have often looked beyond the immediate political drama of a prime ministerial resignation. While the FTSE’s reaction on the day has been mixed, UK equities have posted gains in the following week after each of the last three leadership departures.
“Politics is a brutal game, where today’s winner rapidly becomes tomorrow’s lame duck. Stock markets are equally unsentimental, and yet usually optimistic that a change of leader can provide greater certainty and a firmer hand on the tiller. Sterling and bond markets have shown a less consistent response, highlighting that political events can affect different asset classes in different ways. However, if history is any guide, investors will be watching closely to see whether UK stocks can deliver another post-resignation bounce.
Chris Beauchamp, Chief Market Analyst at IG
