Eq: Dev ex-US

(Madrid)

Europe seems to have been in the middle of a slow moving fragmentation since at least the Financial Crisis. The plodding fissure accelerated last year when the UK voted to leave the EU, and is once again quickening as Catalonia attempts to secede from Spain. That move may not be the last though, as a new frontier seems to be opening in the rupture of Europe: east vs west. Eastern Europe and western Europe are increasingly at odds over immigration and national sovereignty and it is leading to some bitter rhetoric and legal standoffs that may ultimately push an EU state like Hungary, Czech Republic, or Poland to leave the bloc.


FINSUM: Europe is in the middle of a slow-moving and hard-to-predict crisis, but we thought advisors should have their antennae up over where things might be headed.

(London)

Everything was expected to go very smoothly in the British election. The dominant Conservative party, led by Theresa May was expected to cruise to a huge majority in parliament. However, yesterday everything went wrong, as Labour (the left) gained a huge share of parliamentary seats and stripped the Conservatives of their majority. May may be compelled to resign as PM, potentially setting the stage for another election in the near-term. The lack of a majority means there is a “hung parliament”, which will force a coalition government. All of this is leading to doubts over the Brexit negotiations with the EU, and even Brexit itself. On the whole, it seems the coalition government will lead to a significantly “softer” Brexit, where the country might stay in the single market.


FINSUM: This was a shocking development. The Pound dropped on the news, but in the long run it is probably good news for the economy (i.e. a softer Brexit).

 

(Paris)

US and British investors tend to look down on France, but in fact its economy is strong comparatively. It has higher productivity than the UK and the much mocked 35-hour work is actually more hours on average than workers in the US put in. This, combined with Macron’s recent triumph, is exactly why it is time to invest in Europe again. After years of struggle and the rise of populism, it now appears as if the center has turned the corner in France. The economy is recovering nicely and it now looks like the continent is once again ready to thrive.


FINSUM: This is an insightful article. Now that populism seems to have been beat back, it would appear that it is a good time to get back into European stocks.

Source: Wall Street Journal

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