Taking Stock: A Tale of Two Countries: What’s Next for Investors?

July 10, 2017 / by Jennifer Appel, CFA, Research Analyst, Asset Allocation and Christopher Levell, ASA, CFA, CAIA, Partner

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Uncertainty can keep investors up at night and, given the recent turn of political events across the pond, they should brace themselves for some sleepless times ahead. Be it the uneasy and precariously poised coalition government in the UK, or the rise of rookie politician Emmanuel Macron and his newly-formed party in France, the current political landscape is rife with uncertainty. At the moment, we have more questions than answers as we observe the shifting balance of power in the UK, Theresa May’s tenuous grasp on power, the European Union’s stance as negotiations commence on Brexit, and the potential  implications for Northern Ireland, Scotland, and Wales. In France, it remains to be seen how effective President Macron and his party will be given the uphill battle they will likely encounter with the labor unions as they seek reform. Presented as the anti-establishment alternative, Macron runs the risk of falling out of favor with the electorate if he fails to strengthen France’s economy.

So, where does this leave investors? At NEPC, the spate of political news coming out of Europe fits right into one of our key market-moving themes we identified earlier this year: the widespread backlash against globalization with marginalized voters voicing their discontent at the polls. While we expect heightened volatility in the near term, markets have proved their resilience in the face of unexpected political outcomes at home and abroad with the Brexit vote and the US presidential elections. To this end, even though it is difficult to predict the answers to the questions we have raised, we encourage investors to exploit potential dislocation opportunities that may arise from geopolitical events and be on the lookout for attractive valuation opportunities.


Topics: Endowments & Foundations, Private Wealth, Research, Commentary

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