The DAX, Germany’s top stock index, was nearing the red after shares in the country’s largest car makers dropped over a fresh probe into the diesel emission scandal.
Eurozone stock markets have felt the pain of a strong currency in recent weeks, as investors think that improving economic data will force the ECB to curtail its bond-buying program prematurely and — if inflation picks up — lead to interest rate hikes.

But the DAX 30, the key German stock market index, now has an additional problem that has contributed to recent falls. Its motor sector — led by BMW, Daimler and Volkswagen — is under a cloud as more jurisdictions line up to fine the companies over diesel emissions.
Last week, the Mayor of London announced plans to seek compensation from Volkswagen after the true scale of the company’s diesel-fuelled cars’ contribution to the city’s air pollution became known. The sector is at risk of punitive fines across the world.

A further risk is that the ‘Made in Germany’ brand suffers more generally.

However, while this is embarrassing for the German auto sector, and for German exporters more generally, it is likely to be a passing phase. The fines will be absorbed by shareholders, and meanwhile the German auto sector will return to the real long-term battle: is there a durable market for high quality, driver-driven, private cars?

Also Read: Germany’s business index hits record high

German — and European autos’ biggest threat comes from technology from the US — in the form of driverless cars and battery cells, amongst other factors – as well as changing social habits, which include car pooling and young adults driving less in developed economies.

The German stock market crash is a timely reminder of the need to broadly invest so that portfolios will have exposure to the young companies likely to benefit from driverless cars for example.

Diversification of portfolios across sectors, asset classes and regions will ensure investors are best-placed to take full advantage of the present and future opportunities and to mitigate the risks.

Tom Elliott is International Investment Strategist at deVere Group

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There’s a 55 per cent chance that the Conservatives will have a majority of ‎below 60. Should this happen, sterling would wobble, and would fall sharply if that majority is below 40 and Theresa May is again beholden to the hard Brexit lobby of Tory MPs.

FTSE 100 would rally as sterling falls, UK-focused stocks weaken and gilt prices would rise (and yields fall) in anticipation of a weaker economy. Anything below 25 and Mrs May’s job would be on the line, with a leadership contest beckoning. Sterling would then fall further as the risk of a hard Brexit PM, such as David Davis, is priced in. Capital markets would become very volatile.

A Conservative majority of over 60 — from the current 17 —has a 25 per cent chance of occurring. Such a majority would vindicate her decision to call an election, and give her a large enough majority to effectively ignore the estimated 30 or so conservative MPs who want as hard a Brexit as possible.

Sterling would rally as the prospect of Mrs May doing a soft Brexit deal rises, short term gilts would fall in price (and yields rise) as the prospect for the economy improves.

On the stock market, FTSE 100 foreign currency earning stocks would weaken as sterling rallies, but UK-focused stocks would rally as prospects for the economy improve. This would lead to outperformance by mid and small cap indices, compared to FTSE 100.

I estimate a 15 per cent chance of no parliamentary majority. A Labour/Liberal Democrat pact could emerge to govern. The Lib Dems would likely ensure a soft Brexit — a Norway-like arrangement, but without free movement of people, in return for large annual payments to Brussels. But sterling, UK-focused stocks and gilt prices would all fall on the prospect of the Labour leader, Jeremy Corbyn, becoming Prime Minister.

I put a Labour majority at a 5 per cent chance. Not so different from the previous scenario as regards to impact on capital markets, though Britain’s relationship to the EU would be more distant, with fewer obligations and benefits.

There are a few certainties in this election, but one thing we almost know for sure is that turbulence in financial markets is likely to intensify in the short-term as Britain readjusts.

Tom Elliott is deVere Group’s International Investment Strategist

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IFM Correspondent

October 24, 2016: Only a few weeks is left before the US chooses its 45th president. Historically, every US president elected till date has faced a recession or a recession-like scenario. A Wall Street Journal survey in June of more than 60 economists shows that the odds of a recession within the next 12 months are about 21%, a rise of two percentage points higher than the poll taken in April.

“If the next president is not going to have a recession, it will be a US record,” said Gad Levanon, chief economist for North America at the Conference Board in New York. In the United States, the unofficial beginning and ending dates of national economic expansions have been defined by National Bureau of Economic Research (NEBR), a private non-profit research organisation. The NBER defines expansion as a period when economic activity rises substantially, spreads across the economy, and typically lasts for several years.

It might be recalled that when President Barack Obama took office in January 2009, the nation was in midst of the Lehman crisis. When George W Bush started his tenure in 2001, he inherited a recession-like scenario.

The current economic expansion, which is 83-month-old, is already the fourth-longest in more than 150 years. According to studies, it is showing signs of wearing off. In fact, the history of cyclical expansion suggests that the odds are significantly better than 50-50 that the US will have a recession within the next three years. US’s real GDP growth is on a downward trend over the last four quarters, according to the US Bureau of Economic Analysis (BEA).

A lot will also depend on how Brexit unfolds. An unstable EU will affect US in more than one way. Exports, which have been a major contributor in the nation’s post 2008 economic recovery, has suffered in the past few years, thanks to slower growth in Europe. Brexit will only exacerbate this. Historically, the UK has acted as the main channel for US to express its political and economic will in Europe. With the UK out of the European Union, the US will find it harder to influence Europe.

Hence, many are of the belief that the US is overdue for a recession even if Clinton comes to power. According to a report in Yahoo, findings by Tax Foundation show that a Clinton presidency would reduce GDP by 1% over the long-term and cause a 0.7 percent drop in after-tax income for the top 10% of taxpayers.

However, Tom Elliott, deVere Group’s International Investment Strategist, does not foresee much change if Clinton wins. “Assuming Clinton wins, I don’t expect much change from current growth rates (between 1 and 1.5%). She will be under pressure to be ‘tough’ on foreign trade, so Pacific and European trade deals look vulnerable. But the positive effect of completing these is only long term.”

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