The Press and Journal (Inverness, Highlands, and Islands)
Populism’s defeats in Europe give confidence to investors
The year started with some overwhelming negativity about European assets as political fears gripped the markets.
Investors were concerned that populist victories in key elections could have severe repercussions for the euro currency, European economies and stock markets.
But the overwhelming negativity has gradually turned, with populism’s electoral defeats giving heart to investors.
Emmanuel Macron’s victory in the French presidential election earlier this month was greeted as a reassuring result for the establishment.
After the failure of Geert Wilders’ Freedom Party in the Netherlands, there is talk of populism being on the wane.
Investors feared that populist victories at the ballot box would have led to economic policies that were economically destructive.
France was a prime example of this.
Restrictive labour laws have been a factor discouraging firms from manufacturing in the country.
During the French election campaign, establishment parties including Mr Macron’s En Marche! movement recognised to varying degrees that jobs would be created by making employment less secure. The populist response from Marine Le Pen’s Front National tended towards some form of economic isolationism.
Despite the fight-back by the establishment, there are still challenges ahead. To press his agenda in France, President Macron will look to the parliamentary elections taking place in June. It looks likely that he will fall short of an overall majority but, as a centrist and reformer, the president is wellplaced to draw votes from the centre right or centre left. This gives him a decent chance of getting his agenda through, though we will have to wait for the elections to be sure.
While there is also a general election in Italy to look forward to next year, political concerns around Europe have lessened.
Stock markets tend to perform well during periods of recovering economic growth and, although we are more cautious than most when it comes to the outlook for investors, we remain positive about the region.
“Overwhelming negativity has gradually turned”