How should investors react to a hung parliament?

The Motley Fool
Keep Calm and Carry On logo
Keep Calm and Carry On logo

With a hung parliament confirmed after the 2017 General Election, the FTSE 100 defied expectations by jumping over 1% when it opened this morning, heading closer towards the current intra-day record of 7,598.99, despite many expecting the market to open lower on the surprise result (as uncertainty is often reflected in the indices).

In part this is due to the fall in sterling, with many Footsie companies reporting revenues in dollars and thus when converted back into a weakened sterling, profits are higher.

The UK's political landscape is currently far from resolved, with myriad factors in play: political parties now seek talks with potential allies to form a ruling coalition, while many commentators are expecting Theresa May to step down as Prime Minister, despite early reports saying that she has no plans to resign.

'Uncertainty' is the word in vogue, it's fair to say, so how does the current situation affect Foolish investors?

Well, not a lot, I'd argue.

The Motley Fool's investing philosophy is to take a long-term view on a business, ideally with at least a three to five-year holding period should you decide to buy. Yes, it's likely there'll be unexpected events that unfold along the way which ought to be carefully considered in terms of their effect on the share's investment thesis -- but mainly when they're pertinent to the running of the company itself, not necessarily how they affect the stock's numbers and charts on a trader's screen...

That said, uncertainty can also lead to potential buying opportunities. If in the coming days and weeks we see dips and troughs in the share price of quality companies solely due to the market being spooked, that could present a cheaper route into great companies.

Another lesson to take away is that it's worth 'keeping your powder dry' -- i.e. holding some money back rather than being fully invested -- for occasions such as this that may throw up 'unmissable' entry points into attractive investments.

So, to all private investors we say: keep calm and carry on investing Foolishly!

Fear and indecision could hurt share prices in the coming months, and a Brexit decision may now be delayed in the aftermath of the 2017 General Election. To help calm those fears, the analysts at The Motley Fool have written a free guide called Brexit: Your 5-Step Investor's Survival Guide. To get your copy of the guide without any obligations at all, simply click here now!