‘No need to al­ways ex­pect the worst’

The Star Early Edition - - TRUMP FOCUS - Bloomberg

RE­CENT his­tory sug­gests it doesn’t pay to ex­pect the worst ev­ery time a po­lit­i­cal shock hits mar­kets.

Michael Livijn, who as Nordea Bank’s chief in­vest­ment strate­gist makes rec­om­men­da­tions that guide about $100 bil­lion (R1.34 tril­lion), says don’t ex­pect a blood­bath if elec­tions in Europe this year un­leash a pop­ulist wave like the one that pro­pelled Don­ald Trump into the White House. That’s be­cause cri­sis fa­tigue has led to in­creas­ingly rapid mar­ket cor­rec­tions.

“It took the mar­ket three days to shake off Brexit, with Trump it took three hours, and the elec­tion in Italy three min­utes,” Livijn said in an in­ter­view in Stock­holm last Wed­nes­day.

In Europe right now, “we be­lieve that the po­lit­i­cal risk pre­mium is slightly too high,” he said.

The next big date on Europe’s po­lit­i­cal cal­en­dar is March 15, when the Dutch vote in gen­eral elec­tions. Af­ter that, it’s the turn of the euro zone’s sec­ond-big­gest econ­omy, as France holds the first round in pres­i­den­tial elec­tions a month later.

The Na­tional Front’s Marine Le Pen, who wants to leave the euro, is neck-and-neck with Repub­li­can can­di­date Fran­cois Fil­lon, ac­cord­ing to first round polling by Ip­sos So­pra Ste­ria pub­lished on Jan­uary 19.

Small re­ac­tion

As things stand now, Nordea is bet­ting that a Le Pen win will re­sult in a smaller mar­ket re­ac­tion than an out­come that af­firms the es­tab­lish­ment.

Nordea said ear­lier this month it is over­weight global eq­ui­ties, re­flect­ing its view the as­set class will out­per­form oth­ers. Livijn says in­vestors risk fret­ting too much over shocks whose out­come per def­i­ni­tion can’t be pre­dicted, in­stead of analysing the ba­sics.

“Don’t for­get the fun­da­men­tals,” he said. “It’s so easy to just search for the next trou­ble spot.” Nor is he overly de­terred by events in Bri­tain, as the coun­try tries to find a le­gal path out of the EU.

With the UK par­lia­ment get­ting the back­ing of the coun­try’s high­est court to hand it more pow­ers in the Brexit process, the risk of a more drawn out di­vorce has in­creased.

But here, too, in­vestors would do well to stay fo­cused on the num­bers, ac­cord­ing to the Nordea strate­gist. – Bloomberg

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