After the UK Prime Minister’s hints at a general election for the second half of 2024, domestic and global investors are now looking at the political parties’ promises for potential plans for increased levels of spending.

For investors, particularly those engaged in the bond market, the scrutiny of election promises is not merely an exercise in political awareness, but a strategic necessity.

The emergence of vigilantes, a term coined for investors who sell bonds to protest against perceived inflationary policies, has added a new dimension to this dynamic.

The pivotal events of 2022 in the UK, marked by the upheaval caused by a promise of unfunded tax cuts, underscore the critical importance of investors keeping a watchful eye on election promises, as any plans for much greater spending could potentially spark a revolt, in the form of a major selloff, in the bond market – which could upend financial strategies.

Vigilantes in the bond market play a unique and influential role. They are investors who act as guardians of fiscal responsibility, expressing their dissent against policies that they perceive as inflationary, or economically unsound by selling bonds.

The impact of their actions extends beyond the immediate financial markets, often influencing political decisions and shaping the broader economic landscape.

The turning point for bond market vigilantes in the UK came in 2022 when a promise of unfunded tax cuts sent shockwaves through the financial markets.

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