In other European countries where this question was asked, a large majority of delegates expected Greece and the Eurozone to strike some sort of new deal so Greece would be able to keep the euro. But almost half of delegates in Stockholm believe Greece is on the verge of a break-up from the common currency.
Nevertheless, and quite remarkably, two thirds of them do not think financial markets are wrong in their current assessment of the impact of the far-left Syriza party having recently come to power in Greece. This implies that a sizeable share of Swedish fund buyers think equity and bond prices will not be affected much by a Grexit. This apparent indifference to the Greek situation could be explained by the Swedes themselves not using the euro, after they rejected adopting the common currency in a referendum back in 2003 but, to be frank, that’s just guesswork.
Is the euro in freefall?
While fund managers speaking at the event were wondering why financial markets have so far turned a blind eye to Greece, Edgar Senior of ETP-provider Source suggested that it could, besides the ECB’s announced QE programme, have helped sending the euro down further versus the dollar in the past couple of weeks. He said he wouldn’t rule out the possibility of the euro falling down the 1:1 ceiling with the dollar.
“We see currency-hedged ETFs as a huge trend, and are now in the process of launching European equity trackers hedged against [momentarily] harder currencies such as the dollar. At the moment there are some Israeli clients of ours who want to buy a dollar-hedged European equity ETF,” he said.
Permafrost with Russia
Besides Greece, the second obvious current macro risk directly affecting Europe is a further worsening of the relationship with Russia. Again the audience was split, with half of delegates believing the conflict in Ukraine will inflict serious long-term damage to the economy. The fund managers formed a more united front, as none of them sought to downplay the seriousness of the conflict.
“This will have a permanent effect,” said Simon Bailey, who manages a global dividend equity fund for M&G. “We won’t go back to the previous situation, and even if the conflict fizzles away there is an additional risk premium which will be applied to Russia,” he concluded.
We will take a closer look at the effects of the ECB’s QE and the devaluation of the euro on the different segments of the European equity market, which were also discussed at Expert Investor Stockholm, later this week, so keep a close eye on this website!
Click here to see a full overview of the event voting data.
Click here to see a slideshow of photos taken during Expert Investor Stockholm.