The UK market is doing very nicely, thank you very much, and a Labour government isn't about to change that. So say most UK and international investment managers.

The general election is ob-viously going to have an im-pact, but I think people are taking New Labour on board," says Leona Nicholson, equity manager at Bank of Ireland Investment Management. "We're not going to see any drastic changes in macro policy."

Her view is shared by Grant Cullens, head of general retail at Hill Samuel. He is positive on equities "notwithstanding the election" which he sees as simply a "short term issue."

"At the end of the day, the economy is moving along nicely and I really doubt Lab-our would want to rock the boat too much - they have no reason too. The underlying economy is good, earnings growth is reasonable and profitability satisfactory, so we're pretty positive".

Bond yields will have a less eventful time, though general opinion is far from negative. "Bond yields will be stable or fall on the basis that inflation is unlikely to rise dramatically," says Cullens. Bank of Ireland is looking at a dividend yield this year of "about 4.1%". Cullens believes inflation will be on a "downward tack" and regards 2.5% as "not unreasonable". With the Bank of England appearing to reduce its inflation forecast and supporting the same level by the end of the year, he says "on that basis we're pretty happy with bond yields".

Interest rates will increase after the election by about 0.5% "at the most", but Nicholson is less conservative. "A lot of top economists are saying 7.5% at the end of 1997 but most people are going for 6.75- 7%."

The impact of sterling is universally seen as a "a pretty major factor" with Cullens' key concerns lying with those companies heavily reliant on exports into Europe. As such, he is negative on the engineering industry in the short term, whereas oils "might struggle but are fairly sound".

One Swiss analyst sees the strength of sterling, along with interest rate increases and political uncertainties, as factors that will prevent the market from outperforming this year, though he admits "strong economic performance" will help earnings in-crease. He is equally positive about a Labour government, predicting that inflation will be "better than expected" and will be especially "good news for the bond market". Inflation will be kept in check and there will be no dramatic tax increases. His expectations for bonds, with a predicted growth for this year of 8%, are again more positive than for stocks, with 7% growth. Unlike Cullens, he has no problem recommending engineers, along with electronics, food retailers and telecoms, as the most attractive sectors.

Both Cullens and Nicholson are positive on financials and pharmaceuticals, with the latter particularly favour-ed towards Prudential, Barclays and Lloyds. The to-bacco industry is also one to look out for, says Nicholson. "BAT will finish the year very well. Also look out for brand-ed goods like Grand Met and Guinness, which have been out of favour for the last three years". Rachel Oliver"

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