John Major was the prime minister who can boast of being in charge of the country while the FTSE 100 made its biggest strides, research by FE Trustnet shows, despite residing in Number 10 when the early 1990s recession, the Gulf War and Black Wednesday took place.
The recent resignation of David Cameron and the handing over of power to Theresa May has dominated headlines and prompted questions over what the former will be remembered for – although few are going to call him to mind without thinking of his decision to hold the UK’s in/out referendum on the European Union.
Here at FE Trustnet, things always come back to the numbers so we looked at how the FTSE 100 has performed under the last five prime ministers. In an effort to be fair to Cameron, we’ve included the return not only of his overall time as prime minister but for both the coalition government and the Conservative majority.
The below table shows how Margaret Thatcher, John Major, Tony Blair, Gordon Brown and David Cameron (in three ways) stack up. Thatcher was prime minister from 4 May 1979 but the FTSE 100 was only launched on 3 January 1984.
Source: FE Analytics, Google Finance
As mentioned in a previous article, more affects the direction of stock markets than who is prime minister at the time but it is undeniable that the decisions they make have the ability to significantly affect how well equities do.
Our data shows that Major – who was prime minister between 28 November 1990 and 2 May 1997 – saw the highest cumulative return over his time in office after the blue-chip index rose 175.98 per cent in total return terms.
When Major took control of the UK from Thatcher, the country was already in recession as growth had stalled in the third quarter of 1990 amid a global slowdown. The recession lasted until April 1993 and had been the longest to hit the country since the Great Depression, which took place some 60 years prior.
Within this period, the government was forced to withdraw sterling from the European Exchange Rate Mechanism (ERM) after the ‘Black Wednesday’ of 16 September 1992 saw it unable to keep the pound above the lower level demanded by the mechanism.
By the end of Major’s prime ministership, the FTSE had made a higher return than the developed markets-focused MSCI World. As the graph below shows, the index spent a big chunk of the period lagging the MSCI World but made up significant ground towards the end and ended up around 30 percentage points clear.
Performance of indices between 28 Nov 1990 and 2 May 1997
Source: FE Analytics
Thatcher is in second place on the list as the FTSE rose 114.43 per cent from its starting level of 1,000 to 2,144.3 while she was in Number 10.
The UK’s first female prime minister, Thatcher oversaw the privatisation of many industries that were previously owned by the government as she believed that this was “fundamental to improving Britain’s economic performance”.
This included the nationalisation of steel in 1967, British Leyland in 1974 and aerospace and shipbuilding in 1977; more than 50 businesses were sold or privatised during the Thatcher years, in a drive that raised more than £50bn for the Exchequer and led to greater share ownership across the nation.
Labour prime minister Tony Blair saw the FTSE 100 rise 97.98 per cent during his time in office, a period that included independence for the Bank of England, the 11 September attacks in New York and the wars in Afghanistan and Iraq.
Despite the bursting of the tech bubble at the start of the millennium, Blair was at the helm for the bull market that ran up to the start of the global financial crisis then stepped down before this fully took hold and caused stock markets to tank.
David Cameron comes in next with his time at the head of the coalition government, which spanned 11 May 2010 to 8 May 2015.
Performance of index between 11 May 2010 to 8 May 2015
Source: FE Analytics
While economics was a cornerstone of his campaigning during the general election, much of the government’s focus over his time as prime minister was on bringing down the deficit – which resulted in a widespread austerity programme spearheaded by chancellor George Osborne.
There were some headwinds over this time – the 2011 eurozone debt crisis, military intervention in Libya and the Scottish independence referendum being three – but equity markets were offered strong support by historically low interest rates and additional quantitative easing from the Bank of England (as well as the US’ ongoing programme).
However, the fall in the FTSE 100 of close to 1 per cent over the time Cameron was in charge of the majority Conservative government – which of course includes the recent Brexit referendum and his decision to resign – pulls down the return for his overall time as prime minister.
However, Blair’s successor Gordon Brown comes bottom in the rankings after the blue-chip index with an 8.74 per cent, in total return terms, during his tenure as prime minister. Of course, this weak return is down to the global financial crisis which took hold at the start of his premiership and caused a 45 per cent fall in the FTSE.
All the above figures are cumulative returns and if we look at annualised returns, the rankings do change a little.
Source: FE Analytics
Major still holds the top spot, followed by Thatcher, and Brown remains on the bottom. However, Cameron jumps ahead of Blair for his time in the coalition as well as his overall time as prime minister; he’s still second from the bottom though for his most recent stint in Number 10.
