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Carmignac: Greece has effectively left eurozone

Greece has effectively already left the euro, says Edouard Carmignac, chairman and chief investment officer of Carmignac Gestion.

Addressing delegates at the Morningstar Investment Conference, Carmignac warned the “patchwork agreement” that will come as a result of Greece’s departure and France’s rejection of austerity measures will create additional problems ahead.

He explains: “We have a new institution in France which is inexperienced and is pushing Germany to abandon its fiscal review.

“Although there will be some compromises, it won’t be a road full of roses. Greece has, for all purposes, left the euro by now and the resulting patchwork agreement will create additional concerns.

“Europe is heading for recession along with additional uncertainty about how to get out.”

Despite this, the situation in Europe shouldn’t have too much of a detrimental effect on global growth based on decent growth potential in emerging markets and the US.

The largest thematic weighting in the Carmignac Investissement process is to “improving living conditions in emerging markets”, representing 44.7 per cent of the portfolio since the end of April.

Investment opportunities are seen in emerging market equities that are currently trading at a 15 per cent discount compared with the developed markets equivalents.

Specifically, the emerging markets financials sector, and especially those in China, are how the fund participates in the growth of small and medium enterprises.

Carmignac also remains bullish on the US, despite the recent slowdown in job creation figures.

He adds: “The US is ahead of itself so the slowdown in job creation shouldn’t worry us as it is of a short-term nature.”

The US housing market is returning to normal, having represented a “substantial headwind” over the past four years. Alongside the abundance of shale gas production it is an important contributing factor to the US growth story which should more than compensate the need for more belt tightening, says Carmignac.

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