Why Brian Bonar Thinks You Should Invest in ETF's Post French Election
Now that the results of France's presidential election are in, some weary investors have European exchange traded funds (ETFs) in their rearview mirror. That is not an advisable position, however, given that there are plenty of significant European political events on the horizon, such as the legislative elections in France and the national elections in Germany. This leaves more than enough room for continued growth in the European economy and the potential for European ETFs to generate serious wealth. The proactive investor will be closely watching the European political scene for months to come before turning away from ETFs.
As was widely expected, the leftist candidate, Emmanuel Macron, handily defeated Marine Le Pen in the French presidential election. This result was widely favored by international investors, who viewed Macron as the more economically stable and promising candidate. His easy victory did not come as a surprise, but it did help to cement the positive economic growth trend in Europe.
Even though the European economy shows strong signs of growth overall, the euro still has not caught up to the current strength of the U.S. dollar. This means that European stocks are comparatively less expensive to buy right now, which is why savvy investors may be able to still take advantage of the opportunity to buy low in Europe before the conditions are no longer favorable for investment. Depending on how positively markets respond to future elections in Europe, the current political climate may present the prime opportunity that investors have been waiting for in Europe.
Investors will also need to watch closely what happens with Macron's selection of a prime minister and his ability to create a moderate government to balance both major political parties' interests. His failure to bring unity and stability to France could backfire for investors because Macron's progressive economic agenda was one of the major factors fueling positivity among investors in European ETFs. His wide margin of victory in the recent election was not necessarily an indication of a population that is clearly left-leaning when it comes to political and economic issues. Rather, Macron's victory is being explained as more of a rejection of the more divisive rhetoric being launched from Le Pen's side of the aisle. It is widely believed that French voters simply grew tired of the bitter divide between the political parties and opted for the candidate who was best suited to bring a sense of unity back to the country. If Macron does not live up to the potential that so many French voters saw in him, his victory will prove to be extremely short and lackluster for the overall economic growth of the country.
While all of the above is certainly true, Le Pen's stance against immigration and more centrist view of politics were definitely viewed as problematic for France's economy. Had Le Pen come out victorious, there was a general concern that France's growth would be stagnant. Even though France boasts one of the largest and most successful economies of Europe, its continued growth was momentarily threatened by a far-right presidential candidate who was willing to put principles ahead of the most positive economic decisions for the country. Many French voters feared that their jobs and retirement would be on the line if Le Pen was able to follow through with her vision of a more inward-looking France. International investment was feared to be in jeopardy because Le Pen promised to approach international relations with a France-first mentality. This was feared to be the same approach as President Trump has been criticized for taking with international relations from the U.S. perspective. In this context, the election of Macron was partly a rejection of some of the more extreme political and economic views that Le Pen had espoused on the campaign trail during the months leading up to the election.
No matter how the aftermath of the recent French election plays out, European ETFs will continue to be one of the safest investment choices around the globe. Europe still represents more than 20 percent of the economic growth worldwide and is one of the most stable continents, even taking into account the occasional uprisings and economic collapses, such as the recent chaos in Greece. When compared to Latin America or Africa, European ETFs present a far more stable and trusted investment opportunity for investors willing to play a long game in generating wealth. In addition, the European economy continues to be extremely diverse, which makes investing in European ETFs less risky than those from regions that are entirely dependent on specific natural resources or cheap manual labor for their economic growth. Europe still shows strong signs of new economic development and diversification across many different sectors of the economy.
While the needs of every individual investor will vary, European ETFs continue to be very popular because they present far less of a risk than investing in European stocks directly. An investor with limited knowledge in European markets can still make intelligent investment decisions with ETFs because they are not committed to a single stock. This opportunity for diversification and risk abatement makes European ETFs a promising way to try out investing in European markets without requiring the time and dedication of managing individual European stocks within an investment portfolio.
Of course, younger investors will have to balance the lower risks associated with European ETFs against the generally slower growth rates. The role that European ETFs play in your individual portfolio will depend on how much time you have to allow your wealth to grow. If investors are willing to stomach a higher risk, then this could also be the ideal time to invest in individual European stocks. French stocks are projected to continue to climb, barring some type of unexpected political blunder on the part of Macron. Another reason that so many investors are fond of European stocks right now is that they still have quite a way to climb to reach the level of recovery that U.S. stocks have since they bounced back from the lows of 2009. For U.S. investors, this is a more advantageous time to dip their toes in European stocks until U.S. markets show consistent signs of calming down again. European growth is not projected to slow in the near future, and it certainly has the potential to surpass that of what the U.S. has experienced in the last eight years.
About the Author:
Brian Bonar's extensive experience as a prominent San Diego investor provides him a unique perspective on the projected growth of European markets. Bonar has served as the CEO of Trucept Inc since March 12, 2010 and was formerly CEO and Chairman of the Board for Dalrada Financial Services until his retirement from the company. Since graduating from Staffordshire University, Brian has held a long list of prestigious positions at some of the most prominent financial institutions around the world. He has played an instrumental role in leading companies in the finance industry to ensure the overall success of major investment services and their leaders. Bonar has acquired an in-depth understanding of the international industry he serves and is well-versed in all of the major global political and economic events that affect the projected growth and investment tactics of top financial institutions.
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