Sainsbury’s (SBRY) is likely to be the hardest hit of the listed grocers by the ongoing political and economic uncertainty brought about by a hung parliament thanks to its exposure to the high street with Argos, analysts have warned today.

Consumer confidence is expected to take a big hit in the coming months as the fallout from Theresa May’s disastrous performance in the general election puts more pressure on sterling, resulting in higher prices in supermarkets and general retail.

Bernstein analyst Bruno Monteyne said the hung parliament was likely to have a small negative effect on Sainsbury’s shares, as increased odds of a UK recession could hit profitability at Argos in the short term.

He added the result was likely be helpful for Tesco (TSCO) thanks to its international exposure, with profits in Europe and Asia boosted by further weakness in the pound. Morrisons (MRW) is not expected to be affected given its limited activity in general merchandising, but Ocado (OCDO) could be hit as shoppers turn away from more upmarket supermarkets to save money.

The performance of the various stocks up until lunchtime today seems to bear this thinking out, with Sainsbury’s plunging 1.6% to 263.2p so far, while Tesco and Morrisons are in positive territory, up 0.1% to 180.1p and 0.2% to 243.9p respectively. Ocado joins Sainsbury’s in the red, falling 0.7% to 285.9p.

“Sainsbury’s is the most exposed to weaker consumer environment through Argos,” Monteyne said.

“Non-food sales will be impacted more than food by weaker currency (sourced 90% in US dollars) leading to higher prices and the discretionary spend is more likely to be hit. We already forecast Argos like-for-like sales falling to -4% early next year and profitability halving.

“In our view this adequately captures the risk that a weaker consumer would have on the Argos business.”

Food stocks are likely to stand up to the continuing uncertainty better than general retailers, as food has historically been a defensive sector, as people still need to eat regardless of the wider macro environment, Monteyne added.

“The additional uncertainty from a hung parliament is likely to translate into (1) weaker consumer confidence, (2) weaker sterling and (3) possible economic slowdown due to uncertainty for businesses, leading to lower disposable income.

“Food retail will be defensive in a weak consumer environment. We still need to eat. The first part of wallet to be hit by a squeeze in disposable income will likely be eating out, which may lead to a boost for supermarkets as people need to buy more food to eat in. We may even see some trading up initially as consumers treat themselves in the supermarket instead of eating out.

“Over time we expect consumers will trade down, typically from branded into private label or into cheaper brands. These are well-practiced habits for UK consumers. It takes a long recession with a big impact on disposable incomes, and a long period of high inflation, to make people decide to completely change retailer.”

Discounters are likely to thrive in this environment, with German discounters keeping the pressure on their traditional rivals.

Peel Hunt has plugged B&M Bargains (BME) this morning as its top pick in uncertain times. Analysts at Jefferies also noted the strengths of B&M and highlighted Primark-owner Associated British Foods (ABF) as a stock with upside potential.

B&M is currently 0.4% down today to 356.7p and ABF has declined 2% to 2,914p.

General retailers have also been hit this morning as worries grow that weaker consumer confidence will harm the high street more than supermarkets and food supplier, with Marks & Spencer (MKS) down 2.4% to 357.8p, Next (NXT) down 2.4% to 4,247p, Halfords (HFD) down 1.9% to 359.3p and Dunelm (DNLM) down 1% to 616p.

Jefferies said M&S’ strategy shift towards its differentiated and successful food business should provide “some comfort” as it seeks to reduce its clothing space.

On a wider fmcg level, the global multinationals have benefitted once more from the collapse in the pound as their earnings overseas get another boost from currency translation.

Diageo (DGE) is up 1.7% to 2,324p, Reckitt Benckiser (RB) is up 1.5% to 7,970p, Unilever (ULVR) is up 1.6% to 4,335.5p, Compass Group (CPG) climbs 1% to 1,670p, British American Tobacco (BAT) is up 0.4% to 5,531p and Imperial Brands (IMB) is up 0.8% to 3,574p.