“Europe is uninvestable,” a fund manager declares, while carving a slice of roast lamb over dinner in Mayfair, London. “With Marine Le Pen in France, Brexit and populists all over the place, we prefer to avoid any Eurozone risk.” The other fund managers in the room nod, in silence.
The case for investing in Eurozone assets has never been harder to make. Equipped with sophisticated macro models but sometimes lacking confidence in the EU’s political intricacies, investors often decide to give up on Europe altogether. We haven’t.
The year 2017 indeed looks like a political minefield. Anti-euro candidates are gaining ground in the Netherlands and France, both of which have upcoming elections. The UK is about to start its split from the EU and is threatening to implement aggressive tax-cuts to counter investment uncertainty during the negotiating process. Greece’s Syriza government is again struggling to agree on a deal with creditors. Germany will hold elections too, in September, while Italy’s caretaker government is trying to kick the can down the road.
But beyond the political uncertainty, we believe there are opportunities.