Investors are facing a dilemma over where to place their regional bets for the coming months. There are bound to be opportunities afforded by the anticipated politics-driven volatility in Europe, but there’s also a case for capitalizing on the growth story playing out in the U.S.
Some money management and pension fund executives get the jitters when mulling the European political cycle — which began in June with the U.K’s surprise Brexit vote followed in December by votes in Austria and Italy — and the Continent’s ongoing economic struggles. At least for the short term, they appreciate that favoring the U.S. could have more upside.
“There is uncertainty around what might happen in Europe,” particularly given concerns over the rise of populist parties in countries that have upcoming elections, said Tapan Datta, head of asset allocation at Aon Hewitt in London. “But when I talk to the more thoughtful investors, they recognize that (a U.S. play) is purely a tactical, one-off adjustment, a bump in U.S. growth. For six to 12 months, yes, if you have the governance and structure to take advantage of U.S. opportunities,” that is an option.
Philippe Desfosses, Paris-based CEO at the e25 billion ($26.4 billion) Etablissement de Retraite Additionnelle de la Fonction Publique, Paris, acknowledged the recent election of Donald Trump as president of the U.S. could attract assets to the U.S., at least as a short-term trade.
“What could lead investors to invest more in the States is logically the realization that with Trump we may have a great Keynesian steroid shot in the offing … knowing that the U.S. economy is on the mend and maybe already accelerating (leading to) more growth and more profit, at least in the next few years. For investors who most of the time do not really bother (with) what might happen beyond the next two or three years, that’s quite a good reason to put money to work on the other side of the Atlantic,” said Mr. Desfosses. The fund hasn’t changed its regional allocations.