The combination of a sluggish recovery in the economy and concerns over the UK’s fiscal position and credit rating has weighed on UK asset markets over recent weeks. The rally in the equity market has lost steam, while UK bonds have underperformed their overseas counterparts and the sterling exchange rate has fallen sharply. Such concerns seem unlikely to dissipate this side of the forthcoming general election. Nonetheless, the prospect of a major fiscal squeeze - whatever the election result - and a prolonged period of low inflation and low interest rates should eventually prove more favourable for bonds markets at least, and perhaps for the pound too. But equities may continue to find the going rather tougher.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services