Investors, considering Labour's recent election victory, will be wondering what lies ahead.

Examining past data reveals that Labour has often produced positive results when in government.

When word of the new government spread on Friday morning, the FTSE 250 saw a 1.7% increase, but by the afternoon, most of the gains had been erased.

In the past, Labour governments have delivered market returns of more than double that of the Conservatives, according to analysis by InvestEngine.

That is based on 18 years of Labour government compared to 36 years for the Tories.

Andrew Prosser, head of investments at InvestEngine, said: 'The data shows that a Labour government is more than twice as 'friendly' to UK businesses, with returns of almost 11 per cent compared to just over 5 per cent under the Tories.

'Of the 13 prime ministers we've had since 1970, just four have been Labour versus nine Conservatives, but when it comes to annualised returns, the top two performing prime ministers are Labour.'

Harold Wilson's prime ministerial run from 1974 to 1976 proves the most lucrative in terms of annualised returns, returning 20 per cent per year on average.

Jim Callaghan's premiership meanwhile also saw annualised returns of 20 per cent.

While Margaret Thatcher and John Major delivered returns of 488 per cent and 159 per cent each over the courses of their premierships, these only translate to annualised returns of 17 per cent and 16 per cent respectively.

Similarly, Tony Blair falls into the middle of the pack with annualised returns of just seven per cent, despite overall returns of 92 per cent.

David Cameron saw some success with a nine per cent return whilst in coalition with Nick Clegg, but this dropped to just one per cent during his solo premiership.

The below data is based on the MSCI UK net total return in GBP between June 1970 and July 2024. This measures the performance of large and mid cap segments of the UK market.

How have past Governments impacted investments? 

Source: InvestEngine

While Gordon Brown's premiership delivered the worst total return, at negative nine per cent, this translates to a negative annualised return of three per cent. 

Liz Truss, meanwhile, while having a better total return over her term, her short stay in Downing Street means that in annual terms her premiership saw a 25 per cent negative return.

'It is perhaps no surprise that bringing up the rear, with annualised returns of negative 25 per cent, is Liz Truss during her historically short 50-day premiership,' Prosser said.

What does this mean for Keir Starmer's premiership?

Given the length of time they have spent in power, the Conservatives would have delivered better return cumulatively, InvestEngine said. 

As a result, it said prioritising a buy-and-hold strategy is the most effective way of growing wealth, instead of being swayed by political changes.

'Despite the fact that annualised returns under the Conservatives are lower, £100 would have grown to £4,902 under Tory governments but only £447 under Labour, simply because they have been in power for longer,' Prosser said. 

'However, if investors had held that £100 through all political regimes, the same £100 would be worth £21,893 today.'

'For any investor, the biggest asset you can have is time; the longer your cash is invested, the more time it has to grow. Time in the market also gives portfolios the chance to benefit from the wonders of compounding interest,' he said.

Given the initial positive reaction from the markets, investors are likely going to be holding onto the hope that history will repeat itself.