Stock markets under New Labour

Guido points out that the FTSE 100 has fallen in the last 10 years whilst other markets have risen - an "incredible indictment" of New Labour, he says.
If I were he, I'd not put much weight upon this, for three reasons:
1. A slight re-presentation of the data shows a different thing. Comparing total returns on the All-share to those on MSCI's world index shows that the UK has beaten the world over the last 10 years, returning 48.8% against the world's 40.1%. This is because world markets have been dragged down by a fall in the Nikkei; because the All-share has out-performed the FTSE 100, as smaller stocks have done better than big ones; and because the UK market has on average paid higher dividends than other markets.
2.  A booming stock market is no proof of a healthy economy; the Zimbabwean market is doing well now. Indeed, in a really healthy competitive economy, stock markets would do badly - if   they existed at all - because profits would be incessantly bid down by fierce competition.  A rising stock market can therefore be evidence of a lack of dynamism in the economy, that  incumbent firms are being sheltered from competition. The French market has out-performed the US over the long-term.
3. The stock market can rise if profits are expected to rise at the expense of wages. So a rise in the market is consistent, in theory, with bad times for most voters.
Now, I'm not exonerating New Labour here at all - merely saying that evidence of its incompetence isn't to be found in the stock market.

Comments

[Guido Fawkes]

Hold on a second, the FTSE 100 is where the pension funds are, so given my underlying point was how pensions have performed the performance of minnows on AIM is not relevant.

Effectively you are saying that if we compare to the Japanese market - which is a disaster - we are not doing so bad. OK but is that a good thing?

Middle-class tax-paying private pension owning voters have been hit all ways by Brown.

[chris]

The pension funds aren't in the FTSE 100: less than 44% of their assets are now in UK equities (though it was more a few years ago):
http://mas.mellon.com/site/Press/press_details.aspx?id=201&region=US
And AIM stocks aren't included in the All-share index.
If pension funds have had a bias to larger UK stocks over the last 10 years, then it's a failure of asset allocation not of New Labour.
There are lots of good reasons to criticize the government; you don't need to invent bad ones.

[GeoffH]

"The pension funds aren't in the FTSE 100: less than 44% of their assets are now in UK equities "

The shift from equities to government bonds is the direct result of Labour legislation. To repeat: "Middle-class tax-paying private pension owning voters have been hit all ways by Brown"

[Matthew]

It also ignores dividends which pension funds certainly receive and are more common in the UK. The total return index returned 35% for the Ft-se and 48% for S&P, in a common currency of dollars that's 63% for the Ft-se and 48% for the S&P.

[Shuggy]

"If I were he"

But you're not.

I'm bet you're glad.

And you'd be right.

[jameshigham]

Reading Guido's reply here, it still seems a good point that the stock market is not the best criterion.

[Alex]

Also, it's a wholly spurious argument because it's based entirely on where you stick the goalposts. Labour took office not far from the top of the biggest stock market boom in the history of the world; had the Tories won the Feb'74 elections their record would be even better, simply because they would have started with the stock market in the toilet.

Further, as stocks trend up over time, this is also a free gift to longer-serving governments. Of course the Tories did "better"; they had another 7 years of trend to play with, and the regression to the mean from 1987.

In short, it's the kind of intellectually vacuous and dishonest fuckery we expect from Paul De'L Aire Staines. (Have I missed a noble particule in there? Shouldn't that be "Von"?) If he invested his clients' money on the basis of this shite, it should be no mystery why he turned to politics.

[Forex Stock Blog]

i like the quality insight you have provided here. keep this up and i will keep coming back!

[Sales Training]

It's hard to determine the lag between a new government and the effect their policies have on markets. Some policies have immediate effects while others can take 10 - 20 years to flow through.