Will FTSE soar like in 1997? Stock market rallies in anticipation of Labour landslide

• Just like 1997, UK stocks have rallied ahead of  Labour’s expected victory 
• In 1997 FTSE 100 rallied 17% in 12 months prior to and soared 35% in 12 months after the election
• This time, potential winners under Labour rule include housebuilders, contractors, and renewable stocks; possible losers include UK-focused energy stocks and utilities

12 June, 2024 – The UK stock market is rallying ahead of a likely Labour victory in July’s general election, just as it did before the ‘New Labour’ landslide of 1997, according to analysis from the trading and investing platform eToro.

In the 12 months prior to the 1997 general election, the FTSE 100 rallied 17%, propelled by Labour’s large poll lead and reassurance around its centrist agenda. This time, the FTSE 100 stands at 7% and is still rising. In 1997, this was followed by a 35% return in the 12 months after Blair took power.

“The FTSE seems very comfortable with Labour”, said Dan Moczulski, Managing Director at eToro UK. “We’re seeing a clear parallel to 1997, a moderate Labour party unseating a long-standing and divided Conservative government. A change of government after years of Tory rule was a stimulant for the UK stock market in 1997 and it looks like it will be again this year. ”

Table 1: Performance of the FTSE 100 before and after the 1997 election vs 2024 election

Past performance is not an indication of future results. For performance of the FTSE 100 in the last 5 years, please refer to the date in the notes below.

As part of the analysis, eToro constructed two baskets of stocks, one containing ten firms perceived to be potential winners and potential losers based on current policy proposals by Labour, with energy, construction, transport and utilities all in the spotlight.

The winners basket includes the likes of homebuilders such as Vistry Group, and companies vital to their supply chains, such as Travis Perkins, which will likely profit from Labour’s ambitious housing plan. Firms involved in green infrastructure, such as Ricardo, could also stand to benefit from plans to invest in the renewable energy transition.

The losers basket includes UK-focused energy stocks, such as Ithaca and Harbour, included in this category given Labour’s plans to create a publicly-owned ‘Great British Energy’ company, as well as recruitment firms like Staffline that could be hit by new rules on temporary work. Labour’s criticism of the large banks, specifically their failure to pass onto savers the benefits of higher interest rates, could jeopardise their strong run of share price performance. As such, two major banks were also included in the losers basket.

“It looks as if investment in public infrastructure, easing of planning regulations and investment in the green transition are all key pillars of Starmer’s agenda”, continued Dan Moczulski. “Investors may want to reexamine their exposure to these themes.”

“Starmer also faces pressure from within his party to consider greater public control of transport infrastructure and utilities. While this is unlikely in the short term, the looming threat of nationalisation could hit the share prices of companies in these sectors.”

Table 2: Potential winners and losers from a Labour general election victory

– ENDS –

Notes to editors

About this data

Data taken from Refinitiv on 31 May 2024.

Additional data

The FTSE 100 rose 11.3% in the five-year period up to 31 May 2024.

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