Merkel’s polling positive for European equities, suggests F&C’s David Moss

David Moss, director of European Equities at F&C Investments, believes that the strong vote for chancellor Angela Merkel’s party in the German elections ultimately suggests a positive backdrop for European equity investors.

The result is an overwhelming personal vote for Angela Merkel coming closer to an outright majority than anyone since Adenauer in the post-war period and should provide a strong platform for her to continue to drive her agenda.

In recent years this has included strong support for the euro. Despite scepticism at home and surveys showing falling support for the euro project, Merkel has recognised the importance of the stability provided by the single currency for Europe and the help it has provided for Germany as a major exporter.

This has enabled her to support bailouts for Greece, Spain and Portugal, the establishment of the Outright Monetary Transactions (OMT), and help drive significant progress to centralised bank supervision by the ECB. All of which are major achievements given they were not popular with the domestic German population.

The rapid rise of the anti-euro party will cause investors some concerns, but markets are likely to take this vote positively as it should mean no change in the policies that have helped to improve the situation in the eurozone in the last 18 months, albeit Merkel has been clear this will mean continued austerity.

We must wait until the new government is formed to see what roles other parties will have, and what impact these could have on policy. As ever, investors will be less happy with this period of uncertainty. Ultimately, Angela Merkel and the CDU/CSU were the clear victors, and as such this is a positive backdrop for investors into European equities.

The hope and indeed expectation is that after such a resounding victory Angela Merkel can continue to drive the policies that have helped Europe to stabilise and move forward over the last five years but we must wait and see and hope for now.


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