One month after each of the last six U.K. General Elections, the average return of the FTSE 100 has been 1.85 percent. Meanwhile, sterling has fallen by an average of 3.06 percent against the U.S. dollar. So the lesson is simple: buy the FTSE and sell the pound, right?
Clearly – not so.
Just as with last year's volatility in U.K. financial markets sparked by the Scottish independence vote, investors are concerned about what the closest General Election in decades will mean for markets.
There are indeed a few reasons to worry. The economy is fragile, and there is fear that a change of leadership could derail the nascent recovery. There is the threat of a "Brexit" from the EU – and all the uncertainty that would entail – if the Conservatives are returned to power.
And the main problem: it is unlikely we'll get a clear, decisive outcome, and this could lead to gridlock and inaction in the next Parliament.
These are all reasonable concerns, but they will not have a major, lasting impact on the outlook for British financial markets.