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The Case for Macro

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Emerging Markets Outlook for 2017

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What's the Biggest Macro Risk Facing Investors?

January 20, 2017 | News

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The threat posed by global populism is the biggest macro risk facing investors—even greater than global growth stalling—Tom Clarke, co-portfolio manager on William Blair's Dynamic Allocation Strategies team, recently told Citywire Selector.

“Markets do not like political uncertainty, and most of these situations have involved scenarios where you have various political leaders or would-be political leaders deliberately raising the level of uncertainty by trying to pursue their own objectives at the expense of others,” Clarke told Citywire Selector.

He added that populist movements across the globe share a common trait, namely a general preference for less free trade and less free flow of immigration, which create economic growth headwinds.

Investing Implications

In the interview, Clarke said that currently the biggest populist threat is the upcoming French election, which makes the Dynamic Allocation Strategies team cautious on French equities.

“Every victory that populism has—Brexit, President Donald Trump, a resounding ‘no' in the Italian referendum—emboldens would-be populists elsewhere, such as Marine Le Pen and makes investors much more cautious because these things are proving to be more powerful than they thought,” Clarke said.

The U.S. presidential election, for example, has impacted currency opportunities. Clarke highlighted to Citywire Selector that the Mexican peso has been one of the biggest losers from Trump's win, which has made the currency more attractive. On the flip side, the Russian ruble has strengthened post Trump's victory, but it's still a compelling investment opportunity.