Is Political Risk Premium in Europe Too High?

The video discusses the potential political risks in Europe, particularly in light of recent populist outcomes in elections. It examines how markets react to unexpected political events, such as Brexit and Trump's election, and the implications for political risk premiums. The role of the European Central Bank in managing these risks amid rising inflation and bond purchase adjustments is also explored. Finally, the video provides investment strategies for the European equity market, highlighting the economic backdrop and potential for growth.

What is the market's role in relation to European elections according to the transcript?

• To worry about the worst outcomes

• To ignore political risks

• To predict the best possible outcomes

• To ensure the right candidate wins

How might the market react if Marine Le Pen wins the French Presidency?

• With no change in the market

• With a positive surprise

• With a smaller market outcome

• With a larger market outcome

What is the European Central Bank's potential action in response to rising inflation?

• Increase bond purchases

• Step back on its bond purchase program

• Introduce new currency

• Lower interest rates

What investment strategy is advised for exposure to the European equity market?

• Avoid European markets

• Use a broad index like the MCI Europe

• Focus on emerging markets

• Invest in individual stocks

What is the economic growth potential of Europe according to the transcript?

• Fast grower like emerging markets

• Stagnant with no growth

• Declining rapidly

• Slightly higher than potential