Share price winners and losers since the election revealed…

With the election dust having settled more than a month after Labour routed the former government, market confidence is growing.

At the start of August, the Bank of England opted to cut the base rate from 5.25 per cent to 5 per cent, the first reduction since 2020.

Markets remain on the up too, with the FTSE 100 having risen and recovered from a sell-off following weaker-than-expected US employment data.

The FTSE 100 gained 1.68 per cent between 4 July and 15 August, while the FTSE 250 gained 2.83 per cent, while not quite recovering to the heights it reached before the sell-off.

New Government: Keir Starmer’s success in July’s General Election has seen confidence return to the market

With confidence returning to the market, and investors looking to increase their exposure to UK markets, the future is looking rosy for many firms.

Victoria Scholar, head of investment at Interactive Investor, said: ‘We’ve seen that there has been growing confidence in the UK economy since the appointment of the new stable Labour government which could provide some support to financial stocks.

‘Plus with UK stocks facing a Brexit and political discount in recent years, international investors are starting to view UK stocks in a more positive light. 

‘Their cheap valuations could provide a good diversification opportunity in contrast to the overcrowded, highly popular yet highly valued US technology sector, that’s largely been driving gains for the US stock market over the past two years.’

While markets have rallied following the election result, the picture isn’t wholly a positive one, with certain sectors failing to see a boost from the new government’s honeymoon phase.

Who is seeing growth?

In the FTSE 100, healthcare stocks have proven the biggest benefactors of the new government.

Medical technology firm Smith & Nephew is leading the pack, having risen 18.69 per cent between 4 July and 15 August.

Scholar told This is Money: ‘The Labour party has said it wants to use the private sector to reduce NHS waiting list, which could help boost private healthcare companies. 

‘Smith & Nephew, which makes medical equipment, is up by almost 7.5 per cent over the past month. It has also benefitted from activist investor Cevian Capital which has taken a stake in the business.’

There is, according to AJ Bell’s Danni Hewson, an ‘expectation that a Labour government will look to loosen the purse strings when it comes to the NHS.’

Also in the healthcare sector, drug producers Haleon and Hikma Pharmaceuticals are also on the rise, gaining 15.64 per cent and 15.13 per cent respectively during the period.

The other big-winning sector is financial services. In the FTSE 100, Admiral has returned 16.32 per cent since Labour came into government, while the FTSE 250’s Just Group jumped 32.08 per cent.

Asset manager Bridgepoint also gained 29.86 per cent since 4 July.

Etoro market analyst Sam North said: ‘With a significant majority, Labour’s victory signalled economic stability for many. Hence, financial services have also benefited from a perception of reduced regulatory uncertainty or potential regulatory changes favourable to the sector.

‘The sector has also benefited from the anticipation of possible interest rate cuts, which would lower borrowing costs.’

On the rise: Healthcare firms Smith & Nephew, Haleon and Hikma all found themselves among the biggest FTSE 100 risers

The construction sector has also been a key beneficiary of the new Government, with Chancellor Rachel Reeves quick to make new pledges on homebuilding.

In her first speech, Reeves said the Government would take on ‘a new growth-focused approach to the planning system,’ which will see mandatory housing targets restored and a taskforce to ‘accelerate stalled housing sites’.

Hewson said: ‘Labour’s election victory and policy promises have created excitement and confidence in other sectors, including UK housebuilders like Persimmon which have struggled as costs mounted and interest rates spiked. 

‘Since 4 July the housing market has experienced something of a renewed energy, helped along by the Bank of England’s decision to cut base rate at the beginning of August.’

FTSE 100 housebuilder Persimmon has been the second biggest riser in the index since the election, with shares growing 18.19 per cent.

North told This is Money: ‘Labour’s plan to build more homes has been a positive for the industry with other similar companies [to Persimmon] performing well. 

Barratt Developments and Berkeley Group Holdings are two other companies that have benefited over the last month. Berkeley’s decision to raise dividends has also been welcomed by investors.’

Who is suffering?

Luxury goods firm Burberry, known for its trench coats, was the biggest faller in the FTSE 100, losing out largely as a result of lower spending on luxury goods globally.

Scholar commented: ‘Burberry has been caught up in a wider slowdown in luxury demand amid the backdrop of weaker consumer spending, even at the high end.’

In Burberry’s case, the downturn is not a recent development, with shares down more than 50 per cent this year.

North said: ‘The lack of growth in China and global spending on luxury has left the stock trading at levels not seen since 2010.

‘Burberry has been on the decline for a while, so whilst a pick-up in China and a return of tax-free shopping for tourists in the UK would help, ultimately they need their current management to go back to basics and understand what their consumer really wants.’

China’s delicate recovery from Covid has similarly impacted firms in the Industrial sector, due to a lack of demand. Hewson said: ‘The continuing frailty of China’s post-Covid recovery and the country’s listless consumer backdrop has pummelled some of those big mining giants.’

In the red: Firms in the industrial sector have suffered, but luxury goods brand Burberry has seen the largest fall

However, the new Labour Government’s recommitment to achieving net zero may have also impacted the share prices of industrial firms.

According to North: ‘Industrial materials and metals producers experienced declines. Domestically focused companies in these sectors might face challenges due to the potential for tighter environmental regulations, as seen with discussions around the Carbon Border Adjustment Mechanism (CBAM) and Net Zero proposals that could significantly impact operational costs and the viability of traditional manufacturing processes.

‘These regulations could force factories to adopt more environmentally friendly practices or face closure.’

The CBAM would mean that import taxes would be levied on carbon-intensive products, like steel, so that they face a carbon price similar to that of products produced in the UK.

This could affect metals producers such as Antofagasta and Glencore, which have both seen their share prices fall. Glencore shares have dropped 14.36 per cent, while Antofagasta shares are down 12.33 per cent.

‘Glencore has faced challenges since the Labour Party’s win,’ North said, ‘with its current valuations appearing low. Investors might see this as a long-term opportunity, especially if China’s demand for commodities improves. 

‘However, Labour’s focus on environmental sustainability could lead to stricter mining regulations, including carbon pricing and mandates for cleaner technology, which may affect Glencore’s profitability.’

‘If the market expects changes in UK trade policy or closer ties with the EU, this could cause uncertainty for sectors reliant on global trade, such as metals.’

Similarly, Spirax, which produces steam management systems, and aerospace firm Melrose Industries have also both suffered in recent weeks, with shares falling 11.71 per cent and 10.43 per cent respectively.

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