Brexit  

Advisers fear swing to the right in Europe

Advisers fear swing to the right in Europe

Brexit and European elections have been cited as two of the biggest worries for advisers over the coming year.

According to research carried out by FTAdviser Advantage, although advisers have always advocated long-term investment planning within client portfolios, there are still big question marks hanging over 2017.

These remain the triggering of Article 50 which will set out the UK's exit from the European Union, set for March next year, and the potential of a swing to the far-right among other European countries.

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In a poll carried out by Advantage, 43 per cent of advisers thought a swing to the right in countries such as France and Germany - both of whom are set to have elections - could cause extreme political and economic instability in the eurozone.

Some 36 per cent believed the negotiation of the terms of the UK's Brexit from the European Union would be a greater worry.

Their comments have been echoed by those of market traders and analysts. Hedge fund manager Renaud Froissart, manager of the Quaero European Long Short Equity fund, said fiscal policies put into place by the European and individual central banks had been having a knock-on effect on stock markets.

He commented: "European stockmarkets' valuation is somewhat less attractive than before, notably because of higher long-term government bond rates.

This might necessitate a flight to quality, he noted: "Higher rated countries tend to have pro-business policies and stable regulatory and fiscal environments, while their companies have better governance, transparency, and socially responsible practices, productive workforces, and highly attractive domestic markets."

This comes as Huw Evans, director-general of the Association of British Insurers (ABI), called on the UK government to “make a clear commitment that it will seek an early agreement with our European partners on a high level transitional implementation period” following Brexit.

He said: "We call on the government to make a clear commitment that it will seek an early agreement with our European partners on a high level transitional implementation period which will help avoid economic shocks to both the EU and UK.

"This is in both sides’ interest, would not be a sign of negotiating weakness and is essential if we are to maximise the smooth running of the financial system after 2019. 

"Without such a commitment there is little incentive for insurers considering relocation to take a longer term view on whether to press ahead with a decision."