What on earth just happened?!

Markets are hailing a Blue Britain for the next five years. In a result no one expected, Cameron’s Conservative Party was returned to power – this time to govern alone. But what does this mean for you, the trader? The good news is, it should bring opportunities aplenty to benefit from market moves, whether up or down. In this exclusive report we summarise the policies of the returning Conservative Government and look at what they mean for three key sectors and a few of the stocks therein.

There are eleven or so policies making up the Tory Manifesto that largely address tax, the NHS and the current UK housing shortfall. Importantly for business, none of those Labour policies intended to restrict banks and utility companies are present while those that won cross party support – such as research and development tax credits which will benefit those in the healthcare sector specifically – will remain. The fallout from this this general election will be one that is good for the UK markets. While a hung parliament would have been good from a lack of radical policies being passed, this parliament will see radically pro-business policy come through unhindered.

House Builders & Construction

The House Builders experienced a significant slowdown in the run up to this year’s General Election amid speculation of a hung parliament and the part Labour would likely play in forming a new government thereafter. Local authorities added to woes by delaying the processing of planning applications fearing loss of votes from those whose applications were to be turned down.

The Conservatives’ plan to increase the inheritance tax threshold to £1mn and the higher rate (40%) tax threshold to £50,000 will boost a high end sector hitherto nervous of Labour’s Mansion Tax. Expect to see big moves in the likes of Barratt Developments as it and high end sector peers shrug off that pre-election uncertainty and start building, safe in the knowledge that the rich are not set to get any poorer just yet.

Media & Telecoms

The advertising industry is famously intertwined with poltics. Who can forget the relationship between Saatchi & Saatchi and both Labour and the Conservatives? Importantly, note that the relationship with the latter and Margaret Thatcher proved all the more fruitful in 1979!

But aside from this, the fact is that the fundamental drivers of advertising growth are often cited as 70% business confidence and 30% consumer confidence.  Well, Business confidence should grow under a wholly pro-business Conservative government. With pre-election uncertainty replaced by post-election hope, expect to see some big moves in the sector.

Sky boasted of a 20% rise in operating profit for the 9-months ending March 2015 and added 242,000 new customers to its services, a 41% increase on the same period last time round. Many felt its $4.2B outlay for Premier League football rights was an over exuberance, but more felt it was a fair price to pay for an advertising platform worth millions per minute.

ITV impressed at the beginning of the year with consensus beating results, a strong outlook and better than expected dividends (both normal and special). Shares since left a 4% gap on 4 March and have not been back to visit since. A minor bout of pre-election nerves saw the share price find resistance at 273.9p, and that boost to business confidence may go some way to seeing the level re-tested and even broken going forwards.

Will the UK public’s insatiable appetite for entertainment continue to foster a lucrative relationship between the television and advertising industries?

The ad industry earns money by influencing the decisions of consumers – and it’s so good at it that Sky’s €4.2bn purchase of football rights will come back to it in no time. But are we done with being brainwashed?!

Utilities

Pre- election worries that a Labour government would freeze energy bills until 2017 and empower regulators to even cut bills manifested itself in the stock prices of several UK 100 utility companies towards the end of 2014 and into the first quarter of 2015. The Tories are more likely to keep interest rates low for the foreseeable future, meaning that new long term projects aimed at expanding nuclear and gas power generation, at the expense of relatively feeble and expensive onshore wind, can be funded more efficiently going forward.

Shares in Centrica, owner of British gas and the UK’s largest energy supplier, saw somewhat of a recovery into 2015, and with such a strong performance in the face of potential Labour policies that would have forced the separation of the energy generating and retail arms of utility sector members, the company may be set for potential further gains under a new Conservative government that is promising, among other things, to ‘go all out for shale.’

Financials

Banks will benefit more under the Conservatives than they stood to under Labour and more so than they stood to under a coalition government, even. Radical, pro-business policies will be met with minimal resistance now that there is no partner to run them by first.

Those that remain part-owned by the taxpayer will soon be returned to the private sector with Lloyds Banking Group (LLOY) particularly in focus as the only bank to have exceeded expectations at the end of the first quarter.

The Government still owns 20% of the bank and has pledged to offload the remainder of its holding over the next parliament, with the emphasis on making shares available to smaller investors. Once free of the shackles of public scrutiny, Lloyds Banking Group may finally be able to offer competitive remuneration packages to attract and retain the kind of talent that other banks enjoy. Watch this one like a hawk!

Royal Bank of Scotland (RBS) is another of the banks that suffered so much both in the aftermath of the financial crisis and in the overhaul that followed, overseen by the UK government that bailed it out. With Cameron’s government desperate to reduce its stake in this bank, as with Lloyds, Broker Sanford Bernstein has singled it out as the bank that could benefit most from a Tory government.

One of the banks to have managed a nifty sidestep of government intervention post 2008, a move hailed by a top city trader as a ‘boardroom masterstroke,’ reported Q1 results that, while missing consensus, were buoyed by solid profits in its investment banking arm – a department stripped from those banks that were bailed out by the taxpayer. Provisions of another $800mn made for further rounds of regulatory wrist slapping in the coming months may have deterred investors for the time being, but a lack of buying pressure now could serve as a buying opportunity for those with sufficient foresight.

Will a return hungry UK public flock to buy Lloyds and RBS shares when the government decides to offer them up?

Will dire sentiment towards the financial institutions remain the overriding factor, sending prices much lower before they rebound?

On the High Street

The Tories’ tax proposals, namely increasing both the income tax and higher rate tax thresholds, will benefit millions and put more money in the pockets of consumers. David Cameron has also said VAT, National Insurance and Income Tax will be frozen for the duration of the parliament. Interest rates are likely to remain at record lows, inflation is at zero percent and wage growth is….well, it’s happening.

Next (NXT) produced some guidance-beating results at the end of 2015’s first quarter, reflecting growing consumer confidence and well executed expansion plans that saw half the increase in sales attributed to new retail spaces. Shares have spent little time below their 100-day moving average of late. Will ongoing healthy sales figures encourage them to remain above it, perhaps even breaking out above 7640p? Or is it time for a correction?

Whatever your analysis tells you – tradable opportunities will present themselves in the coming weeks. At Accendo Markets, we aim to provide you with the information you need to reach your own conclusions and trade the markets the way you want to. Don’t miss out!

Barratt Developments (BDEV)

Will the price rise towards highs of 560p or fall towards lows of 326p?

Source: IT Finance 08/05/2015

Sky (SKY)

Will the price rise towards highs of 1117p or fall towards lows of 838p?

Source: IT Finance 08/05/2015

ITV (ITV)

Will the price rise above highs of 274p or fall towards lows of 167p?

Source: IT Finance 08/05/2015

Centrica (CNA)

Will the price rise towards highs of 402p or fall towards lows of 234p?

Source: IT Finance 08/05/2015

Lloyds Banking Group (LLOY)

Will the price rise towards highs of 89p or fall towards lows of 46p?

Source: IT Finance 08/05/2015

Royal bank of Scotland (RBS)

Will the price rise towards highs of 414p or fall towards lows of 266p?

Source: IT Finance 08/05/2015

Barclays (BARC)

Will the price rise towards highs of 298p or fall towards lows of 202p?

Source: IT Finance 08/05/2015

Next (NXT)

Will the price rise above highs of 7640p or fall towards lows of 4060p?

Source: IT Finance 08/05/2015