While recent data can only be gleaned from Tory-led governments, ETF platform InvestEngine believes that Labour governments can generate better returns for investors – at least according to their data.
It has been about 14 years since Labour last held the majority in Parliament. Since then, the Conservatives, who tend to be more pro-business, have crafted policy. InvestEngine claims that the change in government could be good for people’s investments, as Labour governments have seen average market returns more than twice as high as Conservative governments.
Andrew Prosser, head of investments at InvestEngine, said they had reviewed annualized returns for the UK market since 1970. The data indicates that Labour governments aligned with returns of almost 11% compared to just over 5% under the Tories.
“Of the 13 prime ministers we’ve had since 1970, just four have been Labour versus nine Conservatives, but when it comes to annualised returns, the top two performing prime ministers are Labour – Harold Wilson and Jim Callaghan, both of whom saw annualised returns of 20% under their leadership,” stated Prosser. “Third is Margaret Thatcher (17%), then John Major (16%) and Rishi Sunak (13%). It is perhaps no surprise that bringing up the rear, with annualised returns of -25%, is Liz Truss during her historically short 50-day premiership.”
There is a caveat to the above statement. The report adds that even while markets may perform better during Labour leadership, cumulatively, investors would’ve been better off investing under Conservatives. This is said to be because Conservatives have been in power for longer and have had more time to see market returns grow for investors.
“Despite the fact that annualised returns under the Conservatives are lower, £100 would have grown to £4,902 under Tory governments but only £447 under Labour, simply because they have been in power for longer,” said Prosser, “However, if investors had held that £100 through all political regimes, the same £100 would be worth £21,893 today.”
Perhaps this is why Conservatives have been elected more frequently. In the long run, they may be better for your pocketbook.
