According to Elliot Hentov, Head of Policy Research at State Street Global Advisors (SSGA), the most likely policy ramification in any German election outcome is higher public spending and details the investment implications of such an outcome. That’s what he states in his latest article German Election Augurs All-Round Spending Boost in Europe.
Highlights:
“This is all a net positive for the trade-weighted euro’s exchange rate. Sovereign spreads across Europe should remain range-bound in such a scenario, aided by the slight pickup in growth prospects. The latter is probably too little to factor meaningfully into equity prices. But the presence of the FDP in the German government should remove worries about future tax increases on German corporates, so there is little room for downside policy risks either,” Hentov writes.
“A surprise comeback for the CDU/CSU and an alternative government coalition would diminish the effects described here but would probably not change the direction of travel. In contrast, a ‘Left Bloc’ coalition would amplify the effects, but German equities could be penalized given increased tax and regulatory costs,” he adds.
