Will a New Prime Minister Impact the UK Stock Market?

So Boris is on the way out after his Cabinet disappeared quicker than the foie gras at Waitrose. I'm staying away from the actual politics, but it got me thinking. How does the stock market react to a new Prime Minister?

We often see a bounce in opinion polls when there's a new leader at the helm. 

It's like when you trade in an old shitty Toyota Corolla for an old shitty for Ford Fiesta, just for a bit of a change. It feels kinda nice to begin with, but before long you realise it's still just a crap car that smells weird.

So does this translate to bigger returns for investors? 

Probably not.

As you can see from the figures below, there's no rhyme or reason to the stock market's performance for the 12 months after the UK gets a new leader. One thing it does tell me though, is that the narrative of the Conservatives being great for public markets and Labour being shite doesn't seem to hold much water.

The bigger lesson here is that there is no correlation between a new Prime Minister and the stock market, especially over the short term. It doesn’t matter whether they’re Tory or Labour, man or woman, fat or skinny.

Regardless of what politicians may try to tell you, they can’t impact public markets and the global economy. As investors, it means we can basically ignore political news in the UK when making our investment decisions.

Over the long term, political decisions can potentially impact markets, but it is the pro or anti business policies that do this, not the personalities involved.