The UK is not about to disappear in a puff of smoke because the Gilts Market is having a minor tantrum. But there is a serious Political Competency premium on Gilts, which will rise when the scale of Labour’s defeat becomes apparent, and the Starmer premiership is up against the wall. Trouble ahead.

The spike in Gilt Yields says it all. Its crisis – again – in Westminster as Starmer is mired in crisis with no obvious way out. Yet again we learn a political lesson – good  political leaders are a scarce commodity. The British electorate is losing faith in politics. What will global investors think?

Labour declared war on Reform yesterday. Is it a battle they can win? Populism trounced the ill-prepared conventional Democrats in the USA last year. UK Gilts are relatively stable, showing markets are not particularly concerned – yet. Little is known of Reform’s non-immigration or Europe agenda.  Can Labour regain the initiative?

Blains Morning Porridge May 9th 2025 – UK / US [...]

The UK election will contain few surprises but leaves the new government massive problems to solve. Biden’s inevitable withdrawal from the US Presidential race adds new uncertainty to the political mix – and may obscure some the critical economic issues.

At a time when markets crave stability and uncertainty, the political picture looks increasingly messy. No problem. These things have a habit of resolving themselves faster than we expect. Bear my mantra in mind: “Markets are never as bad as we fear, but seldom as good as we hope.”