With the Austrian, Dutch and now French elections having been ‘successfully’ navigated, fears of a populist wave hampering both globalisation and global growth have receded significantly. While the Dutch are continuing to struggle in terms of forming a government, worries of a political black swan event have sharply dropped. Unless Italy calls an early election (a low probability event in our view), next on the list of countries heading to the polls is Germany, where not one of the likely outcomes currently concern us – at worst, it may hesitate between a centre left or centre right majority. In addition, the fate of Europe is unlikely to be the focus of these elections, as both sides seem keen to align with the new French President. What will possibly make more of a difference will be the international posturing of the candidates – and here the calendar favours Chancellor Angela Merkel, given she will be attending a sequence of G7, G20, European and NATO council meetings between now and mid-July, just in time for holidays. In Italy, the outlook remains fluid on the political side until we have clarity on the election date. Bad news related to the flow of refugees, banks or debt sustainability may pop up, although the overall risk remains limited in our view.
Source : AXA Real Estate