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Urgent Stock Market Message

UK General Election Result, Opinion Polls Forecasts Analysis, What's Next?

ElectionOracle / UK General Election May 08, 2010 - 01:11 AM GMT

By: Nadeem_Walayat

ElectionOracle

Best Financial Markets Analysis ArticleThe election is over but Britain still waits to find out who will form the next government. The outcome has resulted in a just about as hung a parliament as one could have expected. As things stand clearly the two parties that are most likely to form a coalition government are the Conservatives and Liberal Democrats with a combined total of 364 (307+57), well above the 326 seats necessary for an overall majority.


Meanwhile the picture for the Labour party does not look so good where the Labour and Lib Dem total would just achieve 315 seats (258+57), which means that a coalition would need to involve the SNP, Plaid Cymru AND some Ulster Unionists which would definitely result in a weak chaotic government that would pander towards these small minority party demands that the markets would not accept.

Therefore probability favours a Conservative / Lib Dem Government.

Opinion Polls Forecasts Analysis

June 2009 - Opinion polls at the time prompted the mainstream press to forecast a landslide Conservative victory of as many as 414 seats. In my forecast at the time (02 Jun 2009 - UK General Election Forecast 2010, Seats Per Political Party ) I forecast a much smaller Conservative majority on 343 seats.

The most recent poll in the Daily Mail puts Labour on a 20+ year low of just 18%, Conservatives on 40% and Lib Dems also on 18%. The mainstream press are running with headlines of a Tory landslide victory at the next general election, such as the Sun newspaper forecasting a landslide Conservative majority of 192 or 414 seats in total.

The general election forecast is for 225 seats for Labour and 343 seats for the Conservatives which implies a Tory government with a much smaller majority.

10th April 2010 - By the time of the start of the general election campaign, the polls had converged towards a hung parliament as illustrated by projections of Conservatives on 313.

1st May 2010 - Following all three leader debates, the Liberal Democrats were starting to come off their high but still basking in a poll boost of as high as 10% that was projecting the Lib Dems to result 101 seats.

4th May 2010 - The opinion polls continue to maintain a Lib Dem boost and projected both Labour and Conservatives on within 15 seats of one another. On the 4th I revised my election forecast (U.K. General Election Forecast 2010, Hung Parliament or Conservative Win ? ), that took account of the Conservatives stronger performance in the marginal seats which implied the Conservatives will perform far better than projected by the national polls.

Considering a string of marginal constituencies that are showing a swing from Labour to Conservatives of the 7% needed to win, however also adjusting for the fact that the Conservatives will also lose some seats the Liberal Democrats due to their poll surge. Therefore my revised forecast for the May 2010 General Election is for the Conservatives to be the largest party on between 305 and 325 seats, Labour second on between 240 and 260 seats and Liberal Democrats third on between 70 and 80 seats. Which suggests on the Conservatives best outcome they will just fail to secure an overall majority by as little as 1 seat, which also implies that the Conservatives could decide to govern as a minority government.

Also of interest is that the combined Labour / Liberal forecast range is 310 to 340 seats, so of the Conservatives manage to get towards the upper end of their forecast range, then the combined Labour / Lib-Dem total could also just fail to secure an overall majority which truly would result in a remarkably hung parliament

6th May 2010 - 10pm - The BBC / SKY / ITV Exit Poll surprised everyone as it implied that instead of the Liberal Democrats gaining seats they would in fact lose 3 seats. The exit poll overall confirmed that the UK was heading for a hung parliament.

7th May 2010 - CONCLUSION - Once all of the election results were in, the exit poll now proved remarkably accurate which showed little deviation from the actual results. Also of note is that the poll projections at the start of the election campaign (10th April 2010), also proved highly accurate. Therefore in subsequent general elections the initial average of polls at the start of the election campaign and the final exit poll should be treated as likely to be the most accurate in terms of the eventual election result. Also opinion polls a year ahead of a general election can be expected to prove highly inaccurate.

Conservative and Labour Tribes Crush Liberal Democrat Hopes

The Labour and Conservative voters on election day, looked at the Liberal Democrats and what they represented, the result was that voters of both tribes ran in fear back to their respective parties to ensure that their own traditional party would win which wiped away virtually ALL of the Liberal Democrats Nick Clegg polls boost, which even went so far as the Lib Dems LOSING 5 seats instead of gaining 20 seats as the polls had been projecting barely 2 days earlier. Which implies future poll boosts should also be taken with a pinch of salt.

Election Conclusion

What happens in future elections will now be determined by to what degree will Britain's "First Past the Post" system be changed.

Can the Conservatives Do a Deal with Nick Clegg?

As mentioned earlier, the only functional deal in terms of overall majority is that between the Conservatives and Liberal Democrats. But, the Lib Dems are left of Labour, how can the Conservatives and Lib Dems do a deal ?

How can the Conservatives agree to Proportional Representation which would permanently ensure that they will never win another election?

The outcome of these negotiations is near impossible to forecast, but the deadline is 25th May, though the financial markets won't wait that long before they start to seriously dump sterling and Gilts. The markets want a strong government that will near immediately start to effectively deal with the budget deficit.

Your analyst expecting sterling to be extremely volatile over the coming week and another UK general election this year!

Source: http://www.marketoracle.co.uk/Article19306.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.

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


Comments

Mike
16 May 10, 01:32
Stupid Election

Well, I think this election is stupid in terms how it was perfomed. I think we still live in fidualism era and we say democracy..What are these governements doing to the people? they are destroying people's life more and more. and Why do we have to pay more taxes, to balance the budget. who put us first in this situation. I think previous governments and stupid greedy MPs.We have been paying bloody taxes all our life for what !!! Rubbish NHS, Rusty school system, I would prfer not to pay taxes and pay the money for private health and pay for my kids education privatley...I belive I will get better results that the exisiting rubbishy system...Think about it britons


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