Like him or loathe him, Sunak’s FTSE track record is behind that only of Major

By John Choong

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FTSE falters since election call

Since Rishi Sunak officially called for an election on the 21st of May, the FTSE 100 has fallen from its all-time high. With Labour set for a landslide victory, markets haven't reacted favourably. The reason for this may be that the data between 1986 and 2024 shows that, under Labour, the UK stock market has underperformed. As unpopular as Sunak is, this is one possible reason why markets have turned sour.

Rishi tops the mighty Thatcher

For example, the FTSE 350's growth under Sunak (11.1% p.a.) has only been second to Major (16.8% p.a.), and even outstrips Thatcher (8.9% p.a.) and Blair (5.5% p.a.). Like him or loathe him, Sunak’s FTSE track record is behind that only of Major.

Recent Conservative performance isn't stellar

Since the conception of the FTSE 350, the UK stock market has returned c.9.5% p.a. under the Tories, and flatlined under Labour (c.-0.2% p.a.). That said, there are a few caveats. For one, Labour were only in power for c.34% of the time. Secondly, most of the Tories' growth came under Thatcher and Major. Thirdly, Labour oversaw the Dot Com and housing bubbles in 2000 and 2008 — of which the former wasn't a direct consequence of poor governance necessarily.

However, the Conservatives' recent record isn't great, as returns were flat from Cameron's second stint to Truss' resignation.

What next for the FTSE

Be that as it may, it's worth pointing out that Sunak's stint has had two main factors that have made the FTSE 350's performance under him look better than expected. The first is that his tenure begun after the FTSE's steepest drop since the pandemic on the back of Liz Truss' disastrous mini-budget. This effectively allowed him to get a “head start”, as the FTSE index was oversold.

Secondly, FTSE shares have been trading at a huge discount since 2017. In other words, share price growth has not matched earnings growth for the last 7 years. As such, UK shares have gotten increasingly cheaper over the years, resulting in capital rotating out of the UK stock market. Consequently, this presented bargains that were bound to be snatched up. Thus, it could be said that Sunak was just a mere beneficiary of this.

Nonetheless, credit should still be given where it's due. Although Sunak was not directly involved in bringing inflation down, there's an argument to be made that his policies have not stoked the inflation fire further. Perhaps most crucially, his stance on managing the country's finances allowed the bond market to halt its turmoil at that time and allowed stock prices to rise again.

Even so, his current record hasn't had much of an impact with the electorate given the latest polling data. With the election only a month away, the Tories' odds of a victory are slim, with a turnaround unlikely at this point in time. On that basis, investors' portfolios may not have as good of a time as they have lately if Labour's historical record is anything to go by. Nevertheless, it's always important to remember that past performance is not indicative of future returns.