The hot topic in the UK right now is the fight to replace Boris Johnson as leader of the Conservative (Tory) Party and thereby also the new prime minister (PM). In this explainer article we will look at why we are in this situation, the current frontrunners in the race to become the new leader and PM, and also what has been the impact on financial markets after the previous two Tory Party leadership contests.

The leadership contest candidates

So here are some of the current candidates who have secured the initial support of 20 Tory MPs and are in today’s first round ballot and as of 09.30 BST their best odds according to oddchecker.com.  

Does It Matter Who The Next UK Prime Minister Is For Markets?

Here we are going to look at the impacts on financial markets in the one month, 6 months and one year after recent similar events when Theresa May won the Tory party leadership on 11^th July 2016 and also when Boris Johnson won the contest on 23^rd July 2019.  Although it must be remembered that this was during both the Brexit phase and also the global Covid pandemic, so the results should be reviewed with this in mind.

	Theresa May becomes leader on 11th July 2016	Boris Johnson becomes leader on 23rd July 2019
FTSE 100 one month after	+3.3%	-5.1%
FTSE 100 six months after	+7.8%	+1.0%
FTSE 100 one year after	+11.7%	-18.7%
GBPUSD one month after	-0.7%	-0.7%
GBPUSD six months after	-5.6%	+5.6%
GBPUSD one year after	-15.5%	+5.7%

Key Takeaways

Although the impact on financial markets is somewhat ambiguous after a new leader is elected, what will be interesting going forward is whether the right or the centre of the Tory party seizes power. And depending on which wing of the party succeeds, what will be their approaches to the ongoing relationship with the EU, global inflation pressures and the associated cost of living crisis facing the U.K.

  Author - Mr. Steve Miley Sr. Investment Advisor