24 March 2026
- A more left-wing Prime Minister seen as damaging business confidence, growth and Labour’s election chances
- Gold retains safe haven status despite marked volatility in past 12 months
- Concerns persist about mega cap tech’s ability to keep producing the goods
Fund groups believe political instability is already having an impact on allocations to UK assets, Quilter’s latest Investor Trends survey has found.
More than two-thirds (69%) of respondents said their appetite for gilts was being moderately or significantly shaped by recent events in Westminster, with 31% saying it was only slightly impacting their demand.
Already this year we have seen instability return to UK politics following the scandal surrounding Peter Mandelson’s appointment as the UK’s Ambassador to the United States and the subsequent resignation of the Prime Minister’s Chief of Staff. With speculation that Keir Starmer finds his position under threat, the impact for financial markets is already being felt.
Should Keir Starmer be replaced by a more left-wing candidate, such as Andy Burnham or Angela Rayner, there was unanimity from fund managers that gilt yields would rise. There was also significant agreement (94%) that it would reduce business confidence, damage growth (50%), and reduce Labour’s chances of winning the next election (63%).
These results come after investors overwhelmingly said the Chancellor, Rachel Reeves, had to do better prior to November’s Budget, with over two-thirds (69%) giving her a ‘C’ grade when asked to rate her performance to date.
Elsewhere in the survey, investors believe that gold continues to be a safe haven, with nearly seven in ten (69%) of fund groups identifying it as such despite recent volatility. Cash and US treasuries followed closely behind as the most popular safe havens, highlighting that despite economic policies damaging the standing of the US with trading partners, demand remains for US assets in time of strife.
Meanwhile, as concerns continue to be raised about the level of valuations of US mega-cap stocks and the returns on investment from huge levels of capital expenditure, the world’s largest asset managers appear to have a distinct lack of conviction in these companies. Only 19% expect the US mega-cap companies to outperform the broader US market next year, with 38% believing they will underperform and a further 44% being unsure.
Finally, despite Donald Trump’s tariff regime being thrown into disarray following the Supreme Court ruling on his Liberation Day announcements, respondents still believe consumers will be paying the heaviest price for the US’ economic decisions. More than half of respondents (59%) believe that at least 60% of the cost of tariffs will be passed on to consumers, with 19% expecting more than 80% to be passed on.
However, while the dollar has weakened as a result of such policies, 50% expect no action to strengthen the national currency, while 38% expect a fall of more than 10% year to date to occur before the authorities step in.
The survey, which was carried out prior to conflict erupting in the Middle East, is completed by a number of the world’s leading fund management institutions and is carried out on a quarterly basis, covering forecasts for macroeconomic data and timely indicators.
Lindsay James, investment strategist at Quilter, said:
“Following their election win, the Labour government heralded the return of stability to the top of UK politics. But as ever, drama is never too far away in Westminster and now it appears Keir Starmer’s position is weakened to the point successors are being spoken about. One thing is for sure, however – while fund groups want to see improvements from the current government to stimulate growth, the current alternatives do not seem appealing and as such allocations are being adjusted accordingly.
“Even if Starmer is to survive as Prime Minister, he may pay the price by pursuing more left-wing policies as a result. This too is likely to have a negative effect on markets, especially gilts, and the UK fiscal position is simply not strong enough not to consider the impact. With political volatility, economic volatility is often not too far away either.
“Looking more globally, and while events in Iran and the Middle East are clearly pre-occupying minds today, it is interesting to see gold retain its safe haven status despite the extreme price moves we have witnessed in the last 12 months. There also remains demand for US assets, although not all are loved as much as some, with the mega cap tech stocks coming under pressure given the high expectations and huge levels of investment from these firms.
“As recent events have shown us, diversification remains the best way to protect portfolios, especially with the sheer number of risks that appear to be lurking.”
