Europe is the most “stable and predictable” region for long-term investments, said Patrick Thompson, a member of JP Morgan, Middle East and Africa, in a speech in London.
“The European market is gaining ground among institutional investors,” said Thompson, adding that “common fiscal policies and stimulants for pension fund associations attract capital from the United States.”
According to the head of the largest American investment bank in the so-called “Emea” region (acronym for English, The Middle East and Africa, in translation Europe, Middle East and Africa), the old continent is increasingly attractive to investors, notes the Greek publication.
Trump's side effects
After a decade of focus on the American stock market market, thanks to the attraction of advanced technology, Europe begins to attract investors, the Euro Stoxx 50 index increasing by 10% this year, compared to a loss of 0.64% for S&P 500.
“Since taking over the mandate of Donald Trump, there has been a reversal of expectations for global economic growth due to the uncertainty created by the imposition of customs tariffs on China, which were later relaxed,” the market participants stresses.
But it's not just the rates. The financial world looks at Washington and is shocked. The “beautiful and important draft law” of President Trump for the fiscal reform was approved by the Chamber of Representatives, but the markets react with anxiety. Investors around the world are afraid of an increasing budget deficit of the United States, with potentially devastating consequences for the dollar as a spare currency.
The yields of the long -term US government bonds have already increased, which means that the US now has to pay higher interest rates on loans.
The returns of the 30 -year -old American bonds have climbed to 5.15% – the highest level in the last two years. The returns of the ten -year bonds have also increased significant. The dollar continues to be under pressure – which is why the financial markets wonder: loses its dollar the main currency at world level?
“Warning sign”
To all this was added the retrograde of the US credit rating by Moody's, which has amplified doubts among investors if American government obligations are still suitable as “safe shelters”.
Priya Mishra, a portfolio manager at JP Morgan, told Bloomberg: “The obligation market sends a warning sign. The decision makers can no longer ignore the problem.” The general conditions have worsened: the national debt now exceeds 36 trillion dollars and represents about 120% of GDP. As a different fact, at the end of 2016, the US debt was still below 14 trillion.
This year, only the burden of state interest is estimated at $ 880 billion – more than the entire defense budget.
“Big Beautiful Bill” provides permanent tax reductions – especially for the rich. Persons with low incomes benefit only to a small extent. For example, tips should be non -taxable. But the effect is small, because many poor American citizens do not pay almost taxes anyway. Observers even warn that poorer households could endure the highest damage.
“The decrease in taxes that Trump wants could increase even more huge debt. Markets have already reacted to similar policies in the past. In the 1990s, increasing the yields of American government obligations forced the then president, Bill Clinton, to apply reforms,” the American analysts recall.
Diversification of portfolio
Therefore, it is not surprising that investment companies, such as JP Morgan, want to diversify their portfolios and consider Europe a “very attractive place for investments”. Which translates to the fact that assets have a “strong interest” for European investment products. “European governments have a very clear objective of economic growth, as it is already beginning to be seen in Germany” with its program of investment in defense and infrastructure, says Patrick Thompson.
In the same news, Karen Ward, the head of the European Strategy Department at JP Morgan, points out: “In recent years there has been too much optimism for the United States and too much pessimism. But Germany has the ability to spend a lot of money very quickly.” In this context, he adds, it must be monitored how Europe repositioning in the new international order after swallowing.
JP Morgan management also emphasizes that, in addition to planned investment programs, another growth catalyst will be the large volume of savings that Europeans have. Their favorite classes of assets are the banking sector, technology and companies with small capitalization.
Patrick Thompson added that, in a context of intense global changes and instability such as the current one, “it is essential to adopt an active management approach, because the past models do not always guarantee the same results for the future.”
