Don't buy European doom & gloom
According to many experts, Europe is lagging far behind China and the US when it comes to technology, internal tensions are the order of the day, the regions surrounding the EU are highly combustible and the bloc seems unable to make up its mind about how to deal with geopolitical challengers such as China and Russia.?
These 'minuses' merit a few comments.?
>????Although Europe is lagging behind in the field of artificial intelligence (AI) among other sectors, seven European countries – including five EU members – still rank in the top 10 of the most innovative countries.
?>????Many headlines talk about a Brexit feud that has flared up between Brussels and London over Northern Ireland and about the legal time bomb that Poland has planted under the EU. However, the UK and the EU appear to be heading for a deal. In addition, the EU has a considerable interest in keeping the by far largest Eastern European member in the club. Also, the EU is far too popular among the Polish population and Poland is too dependent on EU funds. Hence, the parties are ultimately likely to make concessions. ?
>????Europe may be geographically more vulnerable than the US, but the Middle East has become more stable, partly due to the Abraham accords. In addition, the EU has managed to curb migration flows with deals such as the one with Turkey, and, so far, it is keeping its ranks fairly closed – albeit cynically – when it comes to migration.?
>????Europe is changing the course that it has been following for many years. This concerns the fact that it first and foremost saw China as an economic opportunity, making everything else largely subordinate to this. Europe is currently focusing on the broader picture, including technological competition, trade, geopolitical rivalry, supply lines and climate change.?
These comments could be refined to a greater extent. Even so, the conclusion remains that, from a politico-economic point of view, Europe could become more appealing to investors than the US over the next few years. This is partly because the S&P 500 and Nasdaq in particular rely heavily on a handful of tech companies that are increasingly under attack.
In our latest Global Political Risks report titled Christmas (and democracy) on hold? we take a closer look at the underlying trends shaping America's and Europe's political and economic future and their impact on financial markets.