The appointment is approaching with the German federal elections which will take place on September 26, and which will mark a turning point after almost 16 years of government of the Christian Democratic Union (CDU), under the leadership of Angela Merkel.
Less than a week before the vote, Algebris’ global credit strategy team led by Alberto Gallo, manager of the Algebris Global Credit Opportunities Fund, focuses on polls that have shown a fairly balanced picture until the beginning of the summer, the Social Democratic Party (SPD), a moderate left party, has been showing strong gains in support in recent weeks. Politico polls on September 14 indicate that the SPD is beating the CDU by a fairly large margin, 25% versus 21%. According to other pollsters, the CDU is below 20%, the lowest level in the last 20 years. The greens are also doing well, reaching around 15-16% in the polls. While the base scenario still remains that of a grand coalition, the chances of a government without a CDU are now higher. The two possibilities are those of a “traffic light coalition” between the SPD, the Greens and the Free Democratic Party (FDP) or a “red-red-green” coalition between the SPD, Linke and the Greens.
“A CDU-less government would mark a major turning point in Germany, as some of the toughest stances on fiscal and monetary policy could soften after nearly 20 years. EU rate markets have started to move since the summer. but real and nominal yields remain broadly in negative territory. European equities and banks rallied in 2021, but show much more attractive valuations than their tech counterparts in the US and Asia. ” According to Algebris’ view, if a ‘left turn’ in Germany were added to a context of rising inflation and potential tapering of the European Central Bank (ECB) in 2022, higher rates and share prices will still be seen. in Europe.