Amid the political uncertainty in Europe and expectations of a stronger U.S. economy, David Tepper's approach to go long on European equities and short on U.S. bonds is right, an investment director told CNCB on Thursday.
American hedge fund manager David Tepper told CNBC on Wednesday that once the French election is out of the way, there's nothing else to worry about in Europe. This is despite a federal election in Germany and a potential general election in Italy.
"If we are short U.S. bonds we are betting on a stronger economy here. That's the bet. So we are betting on strength one way or the other here, strength around the world in one way or the another," Tepper said.
"The only thing on the horizon, different things can happen, hopefully nothing happens political but different things can happen in France. But once you get through it, there's nothing else in the year. You'll have smooth sailing. The German election is just upside to me," Tepper said.
At the moment, the biggest worry for investors in Europe is the uncertainty surrounding the French presidential election. The far-right leader Marine Le Pen is well placed to dispute the second runoff, but the second name in that round has changed with political scandals. Francois Fillon, the conservative candidate, was seen as the next president, but his polling numbers dropped on news he had misused public funds.
Sonja Laud, investment director at global multi asset group at Barings, told CNBC she agreed with Tepper and added that there are "decent" trades in European equities.
"I think that (approach) is good," she said. "And I think it's important to understand…it's since Trump that markets are up, we should not forget it's the economic developments that actually started in the first half of 2016 that have been gradually lifting equity markets," she pointed out.
"If the political risk (in Europe) is overpriced then you might have a decent chance in European equities," she added.
