Political risk trumped by strong monetary environment
June 8, 2018

A positive economic environment may have helped mitigate the impact of political turmoil in Italy and US protectionism, according to NN Investment Partners (NNIP). Preliminary readings from NNIP’s Global Cyclical Indicator show a positive one-month signal, demonstrating stabilizing global growth. While not all data is in, last week’s European PMI (purchasing managers’ index) data and German inflation numbers provide extra support that global economic growth is back on surer footing following the soft patch over the last few months. 

Ewout van Schaick, Head of Multi-Asset, NN IP, commented: “The size of the impact of the various political risks on investor sentiment, risk premia and asset class performance depends to a large extent on the economic and monetary environment we are in. As long as economic growth, earnings momentum and monetary support are in place, the market is better able to shrug off these worries. 

“However, investors must continue to exercise caution. With the installation of the new Italian government, markets have largely settled down. However further volatility can be expected to flare up on any announcement of large additional fiscal spending or any Eurosceptic tone from the new government.

“For global asset classes, which hardly moved on the Italian news, the political theme of protectionism will play a more significant role. Thus far, headlines on US tariffs and the announced retaliations from trading partners have had little impact on the markets. However, this could all change if the focus shifts to bilateral talks between China and the US next week.”





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A positive economic environment may have helped mitigate the impact of political turmoil in Italy and US protectionism, according to NN Investment Partners (NNIP). Preliminary readings from NNIP’s Global Cyclical Indicator show a positive one-month signal, demonstrating stabilizing global growth. While not all data is in, last week’s European PMI (purchasing managers’ index) data and German inflation numbers provide extra support that global economic growth is back on surer footing following the soft patch over the last few months. 

Ewout van Schaick, Head of Multi-Asset, NN IP, commented: “The size of the impact of the various political risks on investor sentiment, risk premia and asset class performance depends to a large extent on the economic and monetary environment we are in. As long as economic growth, earnings momentum and monetary support are in place, the market is better able to shrug off these worries. 

“However, investors must continue to exercise caution. With the installation of the new Italian government, markets have largely settled down. However further volatility can be expected to flare up on any announcement of large additional fiscal spending or any Eurosceptic tone from the new government.

“For global asset classes, which hardly moved on the Italian news, the political theme of protectionism will play a more significant role. Thus far, headlines on US tariffs and the announced retaliations from trading partners have had little impact on the markets. However, this could all change if the focus shifts to bilateral talks between China and the US next week.”



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