Carmignac: German electoral outcome confirms our prudence in European core rate markets

September 27, 2021

Following the results of the German elections, Gergely Majoros, member of Carmignac’s Investment Committee, wrote the comment below.

"At this stage the most likely coalitions are the traffic light or the Jamaica coalitions, both including the Greens. The final one could take months to be identified. So far, there is little visibility in terms of a potentially significantly looser fiscal policy in Germany going forward, even though spending related to climate change should be part of the outlook either way. The lack of visibility is also true regarding the future German stance regarding EU fiscal rules and EU integration."

"This electoral outcome confirms our prudence in European core rate markets. Not only the coalition negotiations could be lengthy, but financial markets are entering the key phase of the normalisation of fiscal and monetary policies. In addition, economic growth expectations could start weakening soon, whereas inflation expectations could still be rising. Overall a difficult situation for Central Banks and fixed income investors."