Previously, the lack of GDP Growth in the UK was a frightening prospect for many investors and residents. However, recent government movement has caused the pound to rise, setting positive sights for a better 2023.
A rising GDP correlates to more jobs being created with better rates of pay. A lower numbered percentage shows a shrinking economy- if this lower percentage persist for two quarters, it is labelled as a recession. And of recent, unfortunately, during 2022, GDP fell by 0.1% following little to no growth early 2022. This follows suit from previous years where GDP growth rate in 2020 was -9.7%, an overall 11.16% decline from 2019.
This decline continued as former minister Liz Truss took position, with sterling markets falling 1% during on air radio broadcasts, amongst other declines throughout her 50 days in office.
However, with the recent re-establishment of power within the office, markets are looking up as Rishi Sunak, the newly elected prime minster, takes form in office.
Commenting on the newly elected prime minister, Nomura strategist Jorden Rochester believes that the movement within government will have a positive effect on the markets: "We assume he has a better understanding of financial markets than Liz Truss - with his background - and that he will allow Jeremy Hunt to continue this 'austerity budget' that we get next week on Oct. 31. This will please the market."
From the moment he took position, the sterling has risen 1.6% against the dollar, having previously risen 1.92% and rising 0.9% against the euro.
Moreover, volatility, a gauge of investor appetite in various markets has dropped to 12.45% from over 17%, conveying the positive effects of the previous month’s government change. The 12% is still above the 8.8% previously recorded over the last 5 years, but already it is a comfortable position for those wating to venture into investment markets.
"In his first speech he said that economic stability and confidence is at the heart of his agenda. So far the markets have stabilised, trusting in the fiscally prudent leaders."
The stabilisation of the sterling is a positive sign of what is to come, and for investors, showcases that the markets are ready to re-enter, and stronger than they have been in the last couple of months.