Macron won't stop populist tide: William Blair

Emmanuel Macron's election as French President won't be enough to stem the tide of populist sentiment in Europe and its effects on European markets, according to William Blair dynamic allocation strategies portfolio manager Thomas Clarke.

Speaking at a media briefing in Sydney, Clarke said global markets are currently dominated by several macro trends: central bank intervention is precluding normal market asset pricing, the fading commodity super cycle, a turnaround in Chinese growth and the growing global anti-establishment movement.

"Populism is in everybody's lexicon now - it's mainstream. We first started integrating it into our investment decisions in February of 2010, when we saw the Tea Party emerge during the Obama administration. And despite what happened in France recently, it isn't going away: geopolitical and macro risks arising out of populism will continue for some time," he said.

"The only thing that will see that macro theme off is a few years of robust, inclusive strong growth across the world. Things are bit better this year than in 2016, but it's still coming from a low base. We're not there yet."

Clarke noted that most investors agree populism will remain an important part of investment decisions, but "most people don't know what to do about it."

"For what it's worth, the way we form our analysis around it is we see scenarios like the rise of populism as what we call game theatres. It's a multiplayer negotiating exercise, where you have several players, competing constituencies, and differing objectives," he said.

"But where geopolitics differs from markets is that each player has a mutual incentive to deliberately increase risk and create uncertainty that otherwise wouldn't exist. They want to issue bluffs and warnings about the consequences of letting the other side win. Basically, they want to agitate and rattle the cage and generate the exact kind of uncertainty markets hate and run away from."

A perfect example of this, he added, was the Brexit vote last year: "In a scenario like that, it helps you to determine whether that uncertainty will help a particular price move towards fundamental value, whether down or up. That can be really useful. Instead of saying, 'I need to get out of exposure here,' you can say, 'I can take a more aggressive view if I can see this geopolitical event triggering a move towards fundamental value.'"

Read more: EuropeWilliam BlairEmmanuel MacronFrench PresidentThomas ClarkeBrexitFebruary ofFranceObamaSydneyTea Party
Editor's Choice
About three-quarters of Australian institutional investors are incorporating environmental, social and governance factors in investment decisions.
Businesses looking to integrate enhanced technological capability must consider its future impacts, or else risk creating a greater trust deficit in the financial services industry.
A comprehensive review of Praemium chief executive Michael Ohanessian's termination and subsequent reinstatement determined the previous board acted inappropriately and unreasonably.
Advisers will soon have access to Challenger's deferred lifetime annuities through Colonial First State platforms.
Brought to you by
16 MAY 2017
It was over 30 years ago when Apple released the first Mac. Over that time, Silicon Valley has been the epicenter of technology advancement for the world. That's why the Netwealth group chose this location ...
Get it Daily
Keep up to date, don't be the last to know! Get the Financial Standard Daily Newsletter.
Pocket investment guides featuring adviser case studies and a glossary.
Investing trends and strategies from the industry’s thought leaders.
Putting the spotlight on investment products that matter.
Expert Feed
Michelle Baltazar
A case for digital activism
The time is ripe for financial advisers to embrace their role as digital activists - fiduciaries who are early adopters of finance ...
Emma Rapaport
Smashed on university fees, smashed on retirement
Since Scott Morrison's pre-budget announcement that debt would be reclassified as 'good' or 'bad', the government spending spree has ...
Christopher Page
The next generation
On March 20, David Rockefeller - former Chase Manhattan chair and last of Standard Oil founder John D. Rockefeller's grandchildren ...
Michelle Baltazar
Hitting the mark
Ten years from now, every financial adviser in the country will be offering their client a managed account solution. It may happen ...
Featured Profile
Professional Subscription for $295
(inc GST) for 1 year.
FS Advice
The Australian Journal of Financial Planning.
Get the free iPad app
Download the Financial Standard iPad app for FREE.
Link to something geb00Jf6