Labour won the general election
July 4 was painted red – with the first Labour victory in a general election since Tony Blair in 2005. Not only that, but it was a landslide. Labour wasted no time in laying out their policy objectives, culminating in Chancellor Rachel Reeves’s address to Parliament on 29 July. Here are some of the main points she covered.
- The Natwest share sale scheme has been scrapped. The government will still exit their position in Natwest, just by selling their remaining stake to institutional investors rather than to retail customers as had been planned.
- The winter fuel payment (£300 a year) has been scrapped for any pensioners not on benefits.
- The Chancellor recommitted to not increasing income tax, VAT, or national insurance in the Budget in October.
- The govt laid out their plans to tax people who are residents in the UK but with their long-term home (domicile) elsewhere. Such ‘non-doms’ have received preferential tax treatment for decades which is coming to an end.
- The government recommitted to closing the ‘carried interest’ rule, which allows private equity fund managers to have their pay taxed as capital gains versus income, the details of which will be announced in the Budget.
- The VAT on private school fees will be effective from 1 January 2025.
- The government will increase tax on energy companies from November 2024 through the Energy Profits Levy which will increase to 38% from 35%.
US markets took a tumble
Wednesday 24 July was a bad day to be the S&P 500. The US’s main stock market index recorded its worst daily decline in 18 months – falling 2.3% – on the back of lower-than-expected results from some heavy hitters. These included Alphabet, Apple, Microsoft, NVIDIA, and Tesla.
To put some of these companies into context, Tesla reported profits that were short of expectations, and Alphabet reported that advertising revenue from YouTube had missed estimates. This all feeds into the idea that US market performance is too reliant on the performance of the so-called ‘magnificent seven’.
It is worth noting however that such market moves, while unpleasant, are normal – and since then the market has rebounded with the index itself stabilising, finishing flat with a rise of 0.86% over the previous month.1
FTSE 100 reverses last month’s trend
The FTSE 100The main stock market index in the UK, the FTSE 100 tracks the performance of the 100 largest companies on the UK stock market. finished July up by 2.46% – welcome news after the index finished May slightly down by 1.19%.1 This increase was despite the election taking place at the start of the month.
But, as we’ve mentioned in other updates and articles, elections rarely have a large impact on the markets – especially when the result of this one was almost certainly set in stone before the campaign kicked off.
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1 Google Finance, July 2024