The headlines proclaim now the real work starts. After months of debate and ducking of the issues there is no hiding from hard decisions about cutting public spending and reducing the deficit.
But for investors there are broader global issues which have been exercising their minds. After all, for some time a number of fund managers have been fairly agnostic about the election result.
They have argued market pressures will force politicians into making cuts – regardless of which persuasion holds the reigns of power. Do not forget, it is a socialist government which is trying to reduce payments to Greek pensioners.
So while the UK has been consumed with election fever, from an investment point of view only those who have had their heads firmly buried in the sand will not have recognised the benefits of a globally-diversified portfolio.
The numbers from the IMA show retail investors have been turning their backs on the UK All Companies sector this year. Over the past six months £689m has left the sector, despite warnings they are missing out on some bargains.
Even the Europe ex UK sector, which has been hit by the fall-out of the Greek crisis, only suffered net outflows of £106m.
The fact is investors make up their minds way before politicians, electorates or ratings agencies for that matter.
This point was neatly illustrated last week by Pimco’s Bill Gross in his latest investment outlook. Gross was taking aim at the rating agencies by reminding us markets are now effectively rating a country’s credit worthiness far quicker and with greater accuracy.
He says: “Their quantitative models appeared to have a Mensa-like IQ of at least 160 but their common sense rating is closer to 60, resembling an idiot savant with a full command of the mathematics, but no idea of how to apply them.”
He then points to the recent downgrading of Spain from AA+ to AA when the country has 20% unemployment, a current account deficit of 10% and has defaulted 13 times in the past two centuries.
“Spanish bonds are effectively trading at Baa levels regardless of what the ratings agencies think,” says Gross.
Meanwhile, from a UK perspective the hope must be the violent opposition to the austerity package in Greece is not a warning. A reaction similar to that of Ireland, where massive cuts have been bourne with greater dignity, would be preferable.
