Stocks

Frightening Shifts in European Politics Keeps Disaster in Focus

by Mike Burnick | March 22, 2017

Headlines are a buzz with this week’s French presidential debate where candidate Emmanuel Macron came out on top.
Market sentiment improved, evidenced by gains in the Euro currency and a narrowing yield differential between French and German government bonds.
This also follows last week’s election in the Netherlands where voters denied far-right populist candidate Geert Wilders in favor of liberal conservative Prime Minister Mark Rutte.
Because of these events, current European leadership hopes to avoid another Brexit or U.S. election outcome.
But, the European train wreck is not over by any stretch. Take a look …
How’d we get here?
Years of aggressive financial risk-taking, overspending and burgeoning debts led to financial panic, bailouts and rising social unrest.

Between 2014 and 2016, the euro sank fast, taking much of Europe down with it. The trillion-dollar bailouts and money-printing operations engineered by Europe’s strongest economies only made the situation worse.
And volatile political conditions are fueling extreme right-wing movements that pushed the political landscape further to the right.
Consider recent headlines …

• Energized populist movement fueling fascism, with some going as far as “embracing World War II era policies.”
  
• Neo-fascists winning regional offices in Slovakia.
  
• Turkish President Erdogan referring to European leaders as Nazi’s.
  

With several political elections across Europe in the coming months, many strongmen choose to ramp up nationalist rhetoric.
This too will not end well.
Consider the French election, where Marine Le Pen broadens her appeal and puts a presidential victory in reach.
While support for far-right populist candidate Le Pen may be ticking lower, so was Donald Trump’s going into the November 2016 election.
It’s too early to say if the populist tide may turn away from the Brexit movement. But it doesn’t matter.
Reforms across the euro zone are needed right now to restore confidence. But that’s going to be a tough row to hoe, especially with so many deep-rooted beliefs over what should be done. Here are just a few:

• Common market underpinned by substantial subsidies for poorer countries.
  
• Direction on immigration.
  
• Managing very different growth rates across the European Union.
  

And don’t forget the lingering debt load that has Europe drifting closer to a sovereign debt crisis.
The fact is, Europe is splintering and going bust.
And as the final shoe drops, there will be massive capital flight into safe-havens such as U.S. stocks and AAA Corporate debt.
Like Larry said: Prepare for a five-year roller coaster ride through hell.
The best way to do this is to buy blue-chip U.S. stocks on pullbacks and buy gold when the signal comes — I’ll tell you when.
Good Investing,
Mike Burnick