How Investors Are Trading UK Political Turmoil

CNBC reported Thursday that UK political turmoil is rattling British assets, pushing gilt yields toward levels not seen in decades and forcing equity investors to rethink their positioning.

Prime Minister Keir Starmer faces mounting internal Labour Party pressure after defying calls from lawmakers to resign. A string of government resignations followed. Meanwhile, former Greater Manchester Mayor Andy Burnham has been confirmed as a candidate in a parliamentary by-election, a prerequisite for formally challenging Starmer’s leadership.

Gilt Yields Signal Market Stress

The benchmark 10-year UK gilt yield is hovering near its highest point since 2008. Longer-dated gilt yields are close to peaks not recorded since the late 1990s. The British pound has weakened, and the mid-cap FTSE 250 index has come under sustained selling pressure in recent weeks.

Analysts at Citi say risks are skewing toward a weaker pound and even higher yields. The bank warned the 10-year gilt could push above 5.25% if a credible leadership challenge materialises.

Citi Stays Bullish on Large Caps

Despite the political noise, Citi analysts maintained an overweight stance on the FTSE 100. The bank screened London-listed equities for resilience in a weak-pound, high-yield environment. Stocks seen as well-positioned included AstraZeneca, BAE Systems, Shell, HSBC and Standard Chartered. Names viewed as vulnerable included homebuilders Barratt Redrow and Bellway, British Airways parent IAG and grocer Sainsbury’s.

A History of Indiscriminate Selling

Ben Needham, UK franchise portfolio manager at Ninety One, told CNBC the market had been “remarkably indiscriminate” this year. In February, he said, shares in companies holding intangible assets were broadly sold off regardless of underlying quality. Ninety One used that dip to build positions in what Needham called SALO businesses, meaning soft asset, low obsolescence companies. Purchases included LSEG, Relx, Experian and Autotrader. He noted that many of those names have since accelerated buybacks, which he views as a signal of value. Most portfolio holdings are still delivering 4% to 8% organic growth, he added. Ninety One has trimmed exposure where valuations have rebounded sharply, particularly in certain mid-cap names tied to AI infrastructure spending.

Fund Managers Scour Mid-Cap Opportunities

Adrian Gosden, London-based investment manager at Jupiter Asset Management, echoed the view that meaningful opportunities exist further down the market cap spectrum. Consumer names including Unilever and Haleon have been caught in the selloff despite broadly intact fundamentals, creating potential entry points for selective buyers. Value-proposition businesses such as Greggs and JD Wetherspoon are continuing to outperform in a tougher consumer backdrop, according to Needham.

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