Charles Stanley is to launch a Political Stability index to measure political risk factors for a number of major developed stockmarkets.
The index, which was developed by Charles Stanley’s investment committee, evaluates the polling share of the two main traditional political parties in a country.
Charles Stanley notes political instability arises when the polling share of the two main parties falls below 65, pointing out that when that share falls below 50 per cent it becomes difficult for a country to form a government.
The index will cover stockmarkets in the US, UK, Germany, France, Italy, Greece and Spain. China will not be included as it is considered a single party political system.
Charles Stanley chief global strategist John Redwood says: “The first figures for the Charles Stanley Political index of political stability show good numbers for the US and Canada, with the UK also in a reasonable position.”
The US showed a rating of 91 per cent, with Canada following at 72 per cent and the UK in third highest place with 67 per cent.
He says the continental European countries, especially France, appear weak.
Polling share in Italy was rated at 59 per cent, in Japan at 58 per cent, with Germany and Greece both at 57 per cent.
Spain and France lagged the list, with 54 per cent and 49 per cent respectively.
While the US has emerged the most politically stable of the markets tracked, Redwood says while Donald Trump’s social media presence is causing “some media and market gyrations”, when it comes to the stability of the two major parties, there is little doubt of their position.
Redwood adds: “High numbers normally mean that either a strong government [in France] can remain in office, or it can be replaced by a new strong government formed by the principal challenger. Weak numbers point to shifting coalitions and problems with forming a government.
“We are currently assuming difficult continental politics are not about to derail the euro and the EU. We assume they will muddle through again.