In the coming months, four important leadership elections are taking place across the EU: France, Germany, Italy, and surprisingly the UK. The question we face is: what outcomes could lead to a structural change that negatively impacts growth potential for companies we either hold or would consider as investments?
In our view, the chance of a disruptive new party winning an election is highest in France and Italy. We see the areas of greatest risk coming from an exit from the euro, or more damagingly, the EU. Recent polls show strong support for the EU in France and Italy. However, the euro while relatively popular in France, is losing popularity in Italy. A win for the anti-euro Five Star Movement in Italy would lift the chances of a new lira.