Ian Cowie really is plumbing the depths here. I should not read such stuff on so much caffeine. Imagine a starving Jack Russell being electroprodded by a toddler and you are nowhere near the level of irritation. Here is Cowie’s thinking, to put it kindly:
The last time a British election failed to produce a decisive result, in February, 1974, the FTSE All Share Index – a broad measure of the stock market – fell nearly 15pc in a month and ended the year more than 50pc below where it began.
then he notices
Of course, the past is not necessarily a guide to the future and many problems present 36 years ago are absent today. For example, there are few strikes, no oil crisis and electricity supplies are uninterrupted. More than two thirds of earnings reported by companies listed in London are generated overseas today, compared with less than 10pc in 1974.
In which case, perhaps the right reaction is “I should stop writing this column now”. I believe we may have had divided Parliaments the 1660s too. Shall we look up the stock market from then as well? But, no, Cowie ploughs on:
But human nature and market psychology have changed little. Ted Scott, director of UK strategy at F&C Investments, which runs some of Britain’s biggest investment trusts, said: “The initial reaction of both the equity and gilt markets to a hung parliament would probably be sharply negative.
What is soaring inflation, cratering profits, a rampant labour sector, a chronically inflexible and structurally unsound manufacturing sector, a government newly arrived to the difficulties of floating currency management, all of these things compared to Mighty Human Sentiment? In the 1970s, some companies fell to a Price Earnings ratio of about THREE. If the stock market ‘crashed’ 15% now, it would still be about 40% above the lows of March 2009.
He goes on to repeat a bunch of outofdate nonsense about ‘defending the pound’ (why? We want exports. Osborne wants exports! That’s why you Telegraph types hate the Euro!) and mortgage rates soaring (again, why? With long term inflation expectations at 3% or so, why? The article gets even worse when he wheels out Ros Altmann to do her usual pro-savers pitch: you know, how we might have been better off if interest rates had been 5% instead of 1% (imagine what the static money supply would have been in that case. Down 10% perhaps? Why do people always use the Telegraph to post their entries for the Worst Economic Advice of the Year competition?)
It looks like Hamish McRae is more sensible here: “The election will not ultimately determine the route of Britain’s recovery”
we tend to overstate the significance of politics in determining economic outcomes. Of course the election matters; it just does not matter as much as it might seem . . . ome things have become clearer over the past couple of weeks. The most important is that the global recovery is broadening. The data is still uneven but then it is always uneven at this stage of the cycle. Corporate confidence in both the US and Europe seems more secure and I find that particularly comforting because many people in the business community were really quite frightened by the collapse of demand they found themselves confronting..
His column remains fixed on the World Economy.
Come back to the implications for financial markets. We can be reasonably sure of the recovery. We know that the world’s big companies have made big advances to their performance and efficiency. We have seen this confidence reflected in share prices.
How very very different from the 1970s. Pity for the Telegraph, who seem to spend an inordinate amount of their time fantasizing about us being back there.
UPDATE: A friend and FTE reader sends me a link to David Marquand, which puts it plainly:
There was a hung Parliament in 1974, but the circumstances then were so different from ours that it has no useful lessons for today.
Instead we get the 1924 precedents for hung parliaments. How did it go?
Baldwin made it clear that he would have no truck with any anti-Labour deal. Asquith did the same. As the leader of the largest party, Baldwin rightly stayed on as Prime Minister until the new Parliament met in January 1924. His Government drew up a King’s Speech. TheLabour and Liberal parties joined forces to vote it down. Baldwin then resigned, and the King, George V, sent for MacDonald, who formed a minority Government – the first Labour Government in British history. It turned out to be spectacularly successful abroad and boringly competent at home, an ideal combination for a party whose chief task was to prove that the country and the constitution were safe in its hands.
Read the whole fascinating article, unless you are Labour and queasy about the future.