Here’s what experts predict
Russ Mould, investment director at AJ Bell, comments: “We must now wait to see who the new PM will be and a decision is needed pretty quickly because the elephant in the room remains Brexit.
“Whoever enters number 10 Downing Street as the new PM now has two years to negotiate a deal with the EU – or decide whether to walk away without one, and perhaps rely on the World Trade Organisation (WTO) status which already serves us well in our trade relations around the world.
“Some investors will think the stock market is too relaxed about what Brexit may mean for the economy UK plc’s earnings power. They might fight shy of British stocks or the pound, or at least sectors with a hefty domestic bias, such as construction, property, retailers and financial services providers.
“Others will think that there is too much gloom about what Brexit may mean and that there could be an upside surprise. In that case, these investors may prioritise British stocks over overseas-quoted ones, or those dollar-earners and UK firms with big overseas exposure, such as miners and engineers, preferring the home comforts of banks, construction, retail and real estate.
“Investors need to remember that in the long term it is not politics that determine company valuations. Ultimately, it is profit and cash flow that drive share prices in the long term so investors should not let short term political noise divert them from their investment strategy.”