Morgan Stanley (NYSE:MS) has said a victory by the British Conservative party would be better for the British Pound and the stock market, reiterating what Deutsche Bank recently stated as well.
In a note to clients, Morgan Stanley said, “Investors are likely to react most positively to an outright Conservative victory, with sterling and gilts likely to rally on the expectation of more aggressive fiscal tightening and less regulation.”
Others not completely convinced, agree the initial response would be a positive one concerning equities, bonds and and the pound, but feel it could affect the stock market in a negative way of public spending were cut.
To imply British public companies will suffer if money from the government isn’t’ thrown at them is to imply British business can’t compete on the free market. If that’s the case, what’s left for them, as that ultimately is what determines how strong a company is, and those in need of a government to prop them up aren’t business in any real sense of the word, although that is happening in an increasing way in other places in the world, like the United States, for example.
It has also been pointed out that a Tory victory could end up with taxes being raised, which is doubtful, and I hope isn’t true. Normally a conservative government will refrain from taxation as a means of stimulating an economy, but we have seen that stood on its head over the last years, so nothing can be counted on in that sense.
But if the British haven’t learned yet that printing more pounds isn’t helping their economy, and raising taxes will do no good in reference to business, they’re going to be in for a rude awakening if that is indeed the result.
I don’t think that will be the case though, and if the Tories remain true to their principles, it should be a much better economic environment based on just cutting public spending, if nothing else.
It also seems this will be much more than a temporary upswing, and if that’s the case, we could see a nice recovery in the British economy that is sustainable and built on real growth, not the artificial prop of throwing public money at business, which can never last or create real jobs.
