Bonds, Currencies, Emerging Markets, Funds / ETFs

Lord Rothschild Warns Investors: Geopolitics Most Dangerous Since WWII

The world now faces greater geopolitical risks than since the end of the Second World War as unemployment threatens European welfare and chaos engulfs the Middle East, Lord Rothschild warned investors in the £2.3 billion RIT* Capital fund,” RT reported today.


World GDP grew at “a disappointing and uneven rate in 2014” following six years of monetary stimulus and extraordinarily low interest rates, the chairman of RIT Capital Partners, Lord Rothschild said in the investment trust’s 2014 annual report.

He also described stock market valuations at near an all-time high with equities benefiting from quantitative easing. The value of assets has been completely disrupted and we don’t know where is their fair value.

Countries focused on growth generation by lowering the value of their currencies. The euro and the yen depreciated by over 12 percent against the US dollar during the course of the year and sterling by 5.9 percent. The unintended consequences of monetary experiments on such a scale are impossible to predict, the banker says.


$FXE Currency Euro Trust 3Y Performance – Courtesy of StockCharts


$FXY Currency Shares Japanese Yen Trust 3Y Performance – Courtesy of StockCharts

“In addition to this difficult economic background, we are confronted by a geopolitical situation perhaps as dangerous as any we have faced since World War II: chaos and extremism in the Middle East, Russian aggression and expansion, and a weakened Europe threatened by horrendous unemployment, in no small measure caused by a failure to tackle structural reforms in many of the countries which form part of the European Union,” Lord Rothschild said.

The banker believes equities may continue to be the destination of choice for investors despite the backdrop of zero or even negative bond yields,” RT reported.

On a more positive note he said that the majority of companies are reporting profits exceeding forecasts together with steady earnings growth. “In Europe, the combination of a more competitive euro, an aggressive program of quantitative easing and the yields available on equities, may well lead to even higher valuations,” the banker said in his statement.

Last Tuesday we published a piece by Michael Snyder warning on a brewing stock market bubble. [Stock Market Bubble: NASDAQ Over 5,000 …Be Concerned! – OpEd]

*) RIT Capital Partners plc, Rothschild Investment Trust, is a large British investment trust dedicated to investments in quoted securities and quoted special situations. Established in 1961, the company is a list on London Stock Exchange and the FTSE 250 Index. The Chairman is Lord Jacob Rothschild, Wikipedia says.

About ETFalpha

Chief ETF Strategist & Co-Founder at EMerging Equity


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