Political risk has been in the spotlight more so than usual in the past twelve months, ever since the UK Brexit referendum result and the US presidential election confounded analysts and markets.
Those events prompted significant changes in the outlook for local fundamentals – more optimistic in the US, more pessimistic in the UK – and thus had a lasting impact on financial market trends. The news in recent weeks makes it feel like significant market moving political events could once again occur this fall.
Political risk has faded in the eurozone. The rejection of populists in three major elections this year has boosted consumer and business confidence, which surely helped to lift annual eurozone GDP growth to its fastest pace in almost six years. Germany’s parliamentary elections in late September are not likely to spring any surprises, either.