Fidelity’s Bill McQuaker has said the outcome of the Dutch election could be a sign that Europe might defy the populist trend, as he explained why he is topping up his European exposure.
Yesterday (15 March), the Dutch prime minister, Mark Rutte, said voters had rejected the “wrong kind of populism” after the country’s anti-immigration party was defeated in the general election.
Nationalist parties have been gaining sweeping support across Europe, and concerns about the outcome of the French and German elections have been looming on the horizon.
Mr McQuaker, who oversees Fidelity’s Multi Asset Open range, said the Dutch election result was “encouraging” because the populist party did considerably worse than expected, meaning Europe might not continue the protectionist trend.
I think peak populism was Donald Trump in November last year Bill McQuakerLast year’s narrative drifted towards populism, with the combined shocks of the Brexit vote for Britain to leave Europe and the election of Donald Trump, but the Fidelity fund manager said financial markets might take a different narrative this year.
“I think peak populism was Donald Trump in November last year,” he said.
Since taking over the management of the range in January, Mr McQuaker has decided to ramp up his exposure to European equities and is now overweight the region.
“This is obviously quite interesting, if not a controversial thing to be doing,” he said, saying he was prompted by the ongoing recovery in Europe.
“I think the European economy is growing nicely; it grew faster than the US last year.”
He also said policy and valuations have made the holdings look more attractive, adding: “Global capital has been selling European equities for the best part of 12 months; a lot of money has come out which could be helpful.
“But what has been standing in the way is politics,” he added.
He said this shift in mood towards protectionism is one of the big risks in the markets.
“It’s interesting that to-date the markets have looked at Mr Trump as a good thing.
“But there are some developments that could come to pass that would make that more difficult, both in terms of growth and prices; we need to keep an eye on the drivers of inflation.
“There is a possibility that if markets climb this wall of worry and things continue to improve that we go through a period of over exuberance and investors chase risk assets."
But he warned, however, that investors need to be wary of the upside risk as well as the downside.
But Blair Cann, certified financial planner at M Thurlow & Co, sounded a note of caution to Mr McQuaker's optimism.
"Europe is a big place and the Netherlands is just a part of it," he said.
He warned against investors making any major decisions on the back of any election result, saying this ignores all the other factors and issues "bubbling under the surface".
katherine.denham@ft.com
