Wednesday, July 24, 2024
Home Stock Analysis JP Morgan predicts Labour victory would be positive for UK stocks

JP Morgan predicts Labour victory would be positive for UK stocks

by xyonent
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According to the leading Wall Street firm, UK stocks have fallen 2% overall in the month following a Labour victory since 1970. J.P. Morgan.

But the bank said on June 10 that things could be different this time if Labour wins the general election on July 4.We think a Labour victory this time is likely to be positive for UK markets.. The current Labour Party has a much more centrist agenda.. “

The party’s policy is probablyA little bit growth-oriented, but the key point is probably to take a prudent fiscal approach.

The memo lists stock market sectors that could benefit if Labour wins a majority, which, while likely, is not yet guaranteed.

Sector

In short, JPMorgan sees supermarkets, banks and homebuilders as potential beneficiaries.

The continued focus on the cost of living crisis will benefit food retailers, the banking sector said.Policy stabilityEspecially since Labour has no plans to impose heavy taxation on bank profits.

Meanwhile, a focus on affordable housing, freeing up land for development and planned system reforms could improve prospects for housebuilders.

Overall, JPMorgan favors mid-cap stocks FTSE 250 It is an index that is linked to the UK economy rather than the international economy. FTSE 100.

Stocks to consider

So, with this in mind, what are some stocks worth considering?

Now, FTSE 250 housebuilders Vistry group (LSE:VTY) has just been promoted to the blue chip index, placing it among the larger developers and others. Bharat Development and Taylor Wimpey.

The stock has risen 58% over the past six months, defying rising interest rates and pessimism about the housing market.

Nonetheless, the valuation doesn’t seem especially expensive, at 13.8 times projected 2024 earnings.

The company announced last year that it would focus on selling affordable homes to organisations such as local authorities and housing associations, rather than private homeowners in the open market.

This is rather “High growth, asset light” An operating model centered on high-quality partnerships.

These include private equity in the rented house construction sector. UK house rents are currently rising at the fastest pace on record. Population growth and a chronic housing shortage will keep rents high.

The dividend outlook is also attractive.

Year Dividend per share Dividend Yield
2024 51.3p 4.1%
2025 70.6p 5.7%
2026 80.2p 6.4%

Of course, rising interest rates will continue to be a challenge for all home builders, and we don’t know when interest rates are going to start to come down, so it’s worth keeping that in mind.

However, on an encouraging note, Vistry announced in May that it expects to achieve over 18,000 completions in FY24, an increase of over 10% over FY23.

As it stands, I don’t have any homebuilders in my portfolio, so Vistry shares might be worth considering.

Long-term investment

Investors should not buy stocks based solely on expectations of how the election will turn out.

Instead, you are better off focusing on a company’s long-term fundamentals, such as its financial position, competitive position, growth prospects, and the quality of its management.

This provides a more reliable basis for making investment decisions, rather than worrying about who is in Downing Street or the White House.

Companies with strong fundamentals offer investors the potential for greater profits in the long term.

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