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The result of the French elections could have a bigger impact on markets than Brexit, according to Marianna Georgakopoulou, Head of Asset Allocation at Ashburton Investments.
London-based Marianna was speaking at a series of investment briefings held at the Pomme D’Or Hotel in Jersey by Ashburton Investments recently (28th/29th March), hosted by Chief Investment Officer, International, Jonathan Schiessl. and which also featured an update on China from Investment Manager Craig Farley.
Highlighting a number of key themes for investors this year, Marianna commented: “A key focus for us in 2017 is the uncertain European political landscape and impact of a potential Euro break-up. There’s no doubt that political risk is elevated in Europe this year, particularly with the French and other elections and, whilst Brexit is significant, the possibility of a real shake-up of the European leadership has the potential to dramatically shape markets.
“Another key focus is on how the US administration will prioritise pro-growth measures versus protectionism. On the one hand, we are seeing a highly business-friendly administration, and there has been strong messaging surrounding deregulation in the financial and energy sectors. However, we should be aware of any disappointment surrounding Trump’s fiscal, tax and deregulation agenda. Higher interest rates will impact US growth, and a strong dollar is a drag for exports.
“More widely, de-globalisation and protectionism are major themes that investors simply cannot ignore this year. The unwinding of globalisation has been underway since 2014 and is set to accelerate with Trump and Brexit. At the same time, the wave of nationalism in both developed and developing countries is challenging the world order and increasing global instability. An inward-looking US in particular increases this sort of uncertainty, and this will be reflected in the markets.”
Commenting on China specifically at the briefings, meanwhile, Craig highlighted that it still offered good growth opportunities, but that investors needed to be mindful of debt-driven instability in the country:
“Beijing remains in a delicate balancing act, and whilst China still offers some fantastic investment opportunities, it needs to shave off its unproductive debt if it is to avoid a severely reduced growth outcome. If history is anything to go by, we expect a significant credit event in China in the coming years, so for investors it’s important to get the right advice and understand the market fully.”
Echoing this, Marianna added: “Both the political and economic spheres continue to produce surprises, and this has resulted in perhaps tone of the most bipolar environments we have seen for a long time. For investors, it’s clear that there are real risks associated with passive strategies, and a more active approach to investment management that places an emphasis on evaluation is absolutely vital in today’s climate.”
