What is the Meaning of Over 1.5 in Betting?

Well, that was quick. A measly few hours since the opening bell and the markets are already up sharply. But it’s not just the UK’s favourite share market that got a boost today. Across the pond in America, shares of major companies soared as well.

Here we’ll take a look at just what happened and whether or not the big swings in the market are a good or bad thing for investors.

What is the UK’s Next Big Move?

Let’s start with the UK’s favourite share index, the FTSE 100. After hitting a 14-month low just a few hours ago, the index is now up over 1.5% for the day and over 3% since opening. What was less than 24 hours ago was considered a sell-off, as the UK stock market headed for its worst day in months. But with just 13 trading days left until Christmas, and a general election set to take place on December 12th, 2019, traders are trying to book some profit before the year is out.

The Market’s Reaction To The UK’s Mid-Term Elections

On the subject of profit-taking, the day before the elections most GBP stock indices crashed, with the FTSE 100 falling 2.2%, the FTSE 250 falling 2.4% and the iShares MSCI ACWI S&P500 down 2.3%. It looked like market players were bailing at the sight of the election results, which, let’s face it, nobody was expecting. After all, it’s not often that you get a hung parliament, which could lead to a prolonged period of political uncertainty. And that’s what sent shockwaves throughout the economy, especially as many traders had also factored in the possibility of a general election into their asset allocation plans. So with the risk of a snap election looming large, traders pulled their money out of the market, causing the major indices to shed a combined 0.8% on April 9th.

The Rise In Pre-Electoral Volatility

But all that happened a year ago. Since then, the UK economy has bucked the trend, with the country enjoying a relatively stable environment and lower volatility in financial markets. So what is it that’s caused such a change? One word: Brexit. Of course, many will argue that the UK’s decision to leave the European Union was the main catalyst for today’s FTSE 100 rally, but that’s selling short the role that international trade, travel and investment have played in maintaining a bullish trend in the UK share market.

Global Interest In The UK Economy Booms

One area that didn’t enjoy a stable environment before the Brexit vote was foreign direct investment, or FDI, in the UK. For years, the UK’s openness to international trade and investment had led to a steady inflow of cash from abroad. But all that changed with the 2016 Brexit vote. Since then, the inflow of FDI has slowed dramatically, with only 44 projects worth a total of £114bn having been committed to post-Brexit Britain. Put yourself in the shoes of an FDI company. Before the referendum, you’d have invested heavily in new equipment and staff to ensure your business could keep up with booming demand. But now that business has moved abroad, where will you get the raw materials you need? Will you stay in the UK to service your customers, or will you look for cheaper locations? These are the kinds of questions that get asked when an FDI company assesses the investment climate in the UK, and they explain a lot about why economic volatility was so high just before and after the Brexit referendum.

Why Is The UK Lagging Behind Other European Nations?

But enough of the past. Let’s get back to the present and the question on everyone’s lips: Is this a good or bad thing for investors? Well, that depends on your outlook. From a growth point of view, today’s FTSE 100 rally is excellent news. Stocks are up sharply and there’s a whole new world of opportunity waiting to be explored. From a value point of view, however, it’s a bit of a mixed bag. The FTSE 100 is up sharply, but so are costs-of-living-related indices such as the Shop Boots price index, the RICS Cost of Land and New Property Price Indices and the ONS Price Indices. What that means in plain English is that it’s getting more expensive to be a consumer in the UK. While that might not sound like an advantage, keep in mind that consumer confidence is largely responsible for driving economic growth in the first place, so the decline in retail sales and rising costs are a cause for some uneasiness. Is there a compromise solution? Well, perhaps not altogether unfamiliar with the ups and downs of the British economy, Germany’s ambassador to the UK recently stated that ‘it’s a bit too soon to say whether or not this is a good thing for the UK economy’. But given that Brexit negotiations are, at best, only slated for the next few years, there’s plenty of reason to be optimistic about the short-term.

Final Takeaway

To recap, in the week before the UK’s general election on December 12th, the FTSE 100 hit a 14-month low. Since then, however, it has rebounded sharply, with gains in the index notched up every day since. Today was no different. After initially falling 2.2% following the opening bell, the UK’s favourite share index rallied sharply, jumping over 1.5% in the last hour of trading and closing up 3% for the day. What was particularly noticeable was the extent of the rebound, with the FTSE 100 hitting a 10-year high just hours ago. Traders have clearly taken note of the country’s economic stability in the last year, as well as the role that Brexit has played in propping up domestic stock markets. But before entering into a jolly-good-news, Brexit-related trade, let’s not forget about the role that economic uncertainty has played in spurring today’s market recovery. With only 13 trading days until Christmas, and a general election set for December 12th, investors have plenty to look forward to. Whether or not today’s rebound is a positive or negative development for the economy and individual investors depends on your perspective (and how much you’re willing to risk).