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5 "Tells" that the Stock Markets Are About to Reverse

UK General Election Forecast 2010 Hung Parliament and Lib-Lab Pact Probable

ElectionOracle / UK General Election Apr 18, 2010 - 12:53 AM GMT

By: Nadeem_Walayat

ElectionOracle

Best Financial Markets Analysis ArticleThe clear winner in the first Prime Ministerial debate was Nick Clegg, the primary reasons for this were:

a. David Cameron had been coached by tory strategists into NOT attacking his opponents and to try portray the Conservative party as the friendly party which did not work.

b. Gordon Brown embarrassingly trying to ingratiate himself with the Lib Dem leader. How many times did he say "I agree with Nick", only to be immediately rebuffed by Nick Clegg.


Given the robotic performances of Brown and Cameron by contrast Clegg came across as very human.

The net result of this was to virtually immediately boost the Liberal Democrats by an average of 5% in the opinion polls which firmly pushes the election results into hung parliament territory.

The latest opinion poll by ICM for the Sunday Telegraph puts the Conservatives on 34%, Labour on 29% and Liberal Democrats on 27%.

The Conservatives require an election result of a minimum of 40% to win. Whilst the Conservatives were recording a poll leads of 38% and 39% there was still a chance of an overall majority due to the margin of error and the fact that the election result will be decided in the bitterly fought out 120 of marginal constituencies (20%), however losing 4-5% for a drop to 34% means the Conservatives would have virtually a zero chance of an overall majority.

The Liberal Democrats should not be prematurely celebrating as Britain's first past the post system ensures that being third in the polls does NOT translate into many more seats i.e. the latest opinion poll would translate into Labour being the largest party in parliament on 280 seats, Conservatives second on 260 seats and Liberal Democrats third on just 72 seats, so the 27% poll does not translate in anywhere near the gains that some Lib Dems may be deluding themselves of, to achieve a political earthquake the Liberal Democrats need to be polling 2% ahead of Labour.

However the Liberal Democrats opinion poll boost may prove short lived as especially worried Conservative party strategists sharpen their knives and go on the offensive against Nick Clegg in the remaining two prime ministerial debates. Given Nicks lack of experience there is a high probability that the Liberal Democrat poll surge will mostly evaporate over the next 2 weeks, therefore I am holding off making any revision to my long standing and unchanged UK general election forecast as of June 2009 which called for small Conservative majority of 343 seats against Labour on 225 and Liberal Democrats on about 45.

Clearly from a strategic point of view a rise in the Lib Dem vote plays into the hands of the Labour party that will ironically retain more seats the better the Lib Dems perform in the election (upto a limit) as the Liberal vote will prevent Labour seats from swinging over to the Conservatives. Therefore Gordon Browns ever calculating mind may have conceived of such a strategy on the realisation that a Labour win is not probable and therefore Labour is ingratiating itself with the Liberal Democrats both to maximise Labour seats and in advance of a post election Lib-Lab pact that on the recent polls would but the Lib-Lab government on 352 seats.

Labours strategy puts the Conservatives at a huge disadvantage as Conservatives pandering to a party that is to the left of Labour is not going to work and is just going to further dilute the Conservatives appeal amongst potential voters, therefore it will increasingly come down to the Conservatives having to battle against both Labour and the Lib Dems, which increases the probability of a hung parliament.

Labour will shortly be playing its Election ace which will be an economic growth surprise to the upside on release of UK GDP Data for the 1st quarter of 2010 on 23rd April as per the forecast (31 Dec 2009 - UK Economy GDP Growth Forecast 2010 and 2011, The Stealth Election Boom ) and in depth analysis in the Inflation Mega-Trend Ebook (FREE Download) and illustrated by the below forecast graph that called for strong economic growth for 2010.

Which is set against the mainstream press / academic economists expectations of a potential double dip recession -

Daily Mail - British Chambers of Commerce - Jan 2010

Britain could be pitched into 'double-dip' recession because of a 'disturbing weakness' in the services sector, the British Chambers of Commerce has warned.

Despite the recent bounce in manufacturing, activity across the broader economy weakened between October and December, compared to the previous quarter, the BCC reported

There was no 'conclusive evidence' that the recession had even ended by the end of 2009, it added.

David Frost, the BCC's director general, said: 'We're on the cusp of recovery, but not firmly out of recession.' The UK could even succumb to 'double-dip recession' unless businesses regain the confidence to start investing for the future, he said.


Gaurdian - Feb 2010

Double-dip recession may not be far off

With retail sales, mortgages, business loan approvals, output and confidence so low, the double-dip may come sooner than expected

New Statesman - David Blanchflower - Jan 2010

Hold on tight, it’s the double dip

A double-dip recession remains possible and with it far higher unemployment

This is definitely turning out to be an exciting and highly volatile election with voter loyalties in constant flux as a consequence of the expenses scandal. The too hard to call election is less than 3 weeks away, the likes of which we have not seen since the 1992 surprise when Labour blew their virtually assured election win of ousting John Major primarily as a consequence of Neil Kinnocks triumphalist public performance at the Sheffield Arena just prior to voting day which turned many voters away from Labour at the very last minute.

It will be interesting to see if the Lib Dems will be able to hold on to a poll rating anywhere near as high as today's 27% for another 19 days.

Source: http://www.marketoracle.co.uk/Article18740.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-10 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on UK inflation, economy, interest rates and the housing market and he is the author of the NEW Inflation Mega-Trend ebook that can be downloaded for Free. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 500 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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