High yielding small-caps that could benefit from a Boris Brexit bounce

If you believe the polls, the outcome of this week’s general election will see Boris Johnson back in Number 10 in time for Christmas. But if, for argument’s sake, the current PM retains power and wins a majority for the Conservatives (which is far from certain), how might the stock market react and which shares might benefit? Among the potential winners of this scenario playing out are British small-caps. Since last autumn, when the market fell sharply, mid- and large-cap indices have done a decent job of recovering, but not so the small-caps. Both the AIM All-Share and FTSE Small-Cap have underperformed a more resilient FTSE 350: Arguably, small-caps have suffered more acutely from a haze of uncertainty caused by the election itself and the all-consuming issue of Brexit. At the smaller, riskier and more unpredictable end of the market, this kind of heightened concern spooks investors. Many will be watching and waiting to see how events unfold. A regular theme in press commentary about what will happen next is what the journalist David Stevenson calls the “Boris Brexit bounce”. The argument is that equity prices have suffered from several years of negative…