The UK stock market, as well as the pound, immediately rallied after Boris Johnson’s resignation as UK Prime Minister. Analysts also note that in the three years of the PM’s reign, the FTSE 100 index was down about 300 points overall. Granted, these series of events could be incidental. But, I can’t help but feel Boris’ departure presents a good buying opportunity for me in the market right now.
Are UK stock markets set to boom?
Since the start of the year, markets have been declining rather than growing.
In the UK, the FTSE 100 has fallen by 4% since the New Year, while the FTSE 250 has fallen to a greater extent, by 20%.
Companies in the FTSE 100 derive the lion’s share of their income from abroad. Therefore, I know this index is much more likely to react to global events. In contrast, the FTSE 250 index presents a more relevant picture of how domestically focused stocks are faring. It is in bear market territory currently. But, following news of the PM’s resignation last Thursday, it instantly jumped to a one-week high.
Could FTSE 250 be the most likely to benefit?
Whenever the stock market corrects itself downwards, I ask myself whether I can benefit from a reversal. I observed immediate stock market optimism following Johnson’s resignation. And I foresee a greater bounce for the stock market when the new PM is chosen.
I know from the history books that new Prime Ministerial appointments can make a difference to the stock market.
I will cite two examples. In 9 April 1992, John Major’s Tory government coasted to a landslide election win. And the stock market drove higher. The euphoria was short-lived, however. By that summer, the UK stock market, as well as the domestic currency, declined. Additionally, Tony Blair arrived in Downing Street in 1997 when a bull run was afoot. It continued until 2000. However, by the end of 2003, the UK stock market had lost almost all the ground it had made.
The common theme that I have deduced from these two events is that the national optimism following a major political event tends to be reflected in domestic share prices. At least in the short term, although I plan to hold any new investments for years to come rather than selling once I’ve made a small profit.
How I plan to take advantage of stock market optimism
My Stocks and Shares ISA portfolio has weathered some serious volatility so far this year, from soaring inflation and rising interest rates, to the war in Ukraine. I have noted a considerable decline in the value of my ISA as a result of this triple threat of variables.
I am focused on the long term, so you will not see me losing sleep because of these market headwinds. Nevertheless, I am also keen to take advantage of any tactical market opportunities that can help me to recoup my losses for the year so far.
This is why I am bullish on the UK stock market in the short term, particularly the companies listed in the FTSE 250. I intend to load up on several domestic-focused value shares that can withstand inflation as the nation rides the wave of political hope and optimism in the search for the new PM, however short-lived this turns out to be.
