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Migrants, membership and markets


Migrants, membership and markets

Jeffrey Sacks

By Jeffrey Sacks

Head - EMEA Investment Strategy

February 16, 2016Posted InInvestments

Investors in financial markets are used to monitoring flows of capital. More and more, though, they might also need to start monitoring flows of people. Mass migration had a significant effect on politics and society in many countries in 2015, especially in Europe. The risk is that this begins to spill over into financial markets. Here are three key things investors need to watch.



Official numbers say that a net 336,000 migrants arrived in the year to June 2015 – a new record high. Many Britons believe the only way to limit future numbers is for the UK to quit the European Union – ‘Brexit’. Among those who want the UK to leave, immigration is the number one issue – figure 1.

To help boost the chances of the UK staying in, Prime Minister David Cameron hopes to strike a deal with the EU over immigration. This could involve getting special powers to stop EU migrants from claiming various benefits in the UK for four years. But many Britons aren’t convinced these powers would be effective – especially if they can only be used with the agreement of other members. There is therefore a growing risk of Brexit, which could negatively affect sterling-denominated assets, as well as weakening the European Union.

Migrants, membership and markets


German political leadership

Up to one million potential asylum-seekers may have arrived in Germany since the start of the migration crisis. But Chancellor Angela Merkel’s humanitarian policy is severely damaging her popularity among German voters. National elections are still almost two years away, but local elections in Baden-Württemberg are expect to show gains for an anti-immigration, anti-EU right-wing rival party. As the continent’s senior statesman and a driving force in EU integration, Mrs Merkel’s political demise would be a blow to the European project and potentially contribute to uncertainty in the markets.


Greek bailout

More than 850,000 migrants and refugees arrived last year in Greece, typically crossing from Turkey, many hoping to reach Northern Europe. The European Commission has heavily criticised ‘serious deficiencies in the management of the external border,’ with the threat of temporary border-controls for Greece unless it improves security. This could complicate Greece’s bailout talks with the EU and further strain relations. Citi Research believes that an eventual Greek exit from the Eurozone is still more likely than not, something that could unnerve investors in Euro-denominated assets. Still, a deal is in both sides’ interests, perhaps involving tighter borders in return for easier bailout terms, which would likely be positive for both the Eurozone and markets.