Jupiter Merlin Weekly: Democracies divided, autocrats in alignment
The Jupiter Merlin team discuss President Macron’s unhelpful ‘diplomacy’, which damages Western unity in facing off against Russia, China, Iran and North Korea.
This past couple of weeks have witnessed strategic policy dividing lines open among the Western democracies. While both France and Germany are providing assistance to Ukraine to a degree, we have had cause on several occasions since the invasion to observe the extent to which both President Emmanuel Macron and Chancellor Olaf Scholtz have radiated mixed and unhelpful messages and remained out of alignment with key NATO allies as the conflict has progressed.
Nevertheless, even if others struggle to, it sees itself as the third of today’s Great Powers, alongside the United States and China. Only it isn’t. And it is not, precisely because it is a heterogenous hotchpotch; despite fielding two presidents (for the Commission and the Council of Ministers respectively, which in itself speaks volumes), it finds itself in the position where individual national leaders of member states can circumnavigate Brussels and pursue their own foreign policy interests and agendas (though they may not unilaterally enjoy their own trade agreements with non-EU countries).
It is this fundamental insecurity and lack of direction which leaves the EU as a lost soul in search of a purpose. But even when it occasionally finds one of its own on the world stage (e.g. the Iranian Nuclear Containment Treaty in which the EU as an entity was a co-signatory), or has one thrust in its direction in which it should be an active and obvious participant in finding a solution (e.g. the 1990s Balkans War; the current conflict in Ukraine), it proves either relatively or wholly useless: too many competing and incoherent voices combined with sclerotic and catastrophically slow decision-making all too often rendering it irrelevant.
France has always had an on/off relationship with NATO. In 1966, De Gaulle ordered all NATO headquarters out of France if they were not under direct French command, in response to which NATO removed all French commanders from all NATO responsibilities wherever they were located (it is a myth that France left the alliance: to whatever limited effect, technically France still remained a member thereafter). Having then been brought in from the cold, a new low was reached in November 2019. Despite all the very obviously mounting geopolitical tensions with China, Russia, Iran, North Korea, and the Alliance under pressure in Afghanistan from a resurgent Taliban, Macron chose that time publicly to declare NATO “brain dead”. He subsequently doubled down on his own unique brand of diplomacy: where munitions are manufactured under joint contracts encompassing EU and non-EU suppliers, Macron has delayed such arms being sent to Ukraine until a procurement structure is put in place which explicitly favours EU companies. Despite President Zelensky’s urgent need for artillery shells (and repeating Zelensky’s words to NATO in February in the “Panzer Poker” row about the supply of main battle tanks “you take your time, we’ll just carry on dying”), Macron is more interested in politicking than helping.
Macron’s recent visit to Beijing was another case in point. In making his “Europe is not a vassal of America” statement, Macron managed to imply that the EU (for which he had no authority to speak) should not be taking sides against China. Allowing the widely made interpretation that Europe has no viewpoint on China’s intentions to subjugate Taiwan, it was a diplomatic disaster. Further, his personally beseeching the Chinese to broker a peace deal between Russia and Ukraine cut no ice.
Having been rebuffed and made to look a fool by Putin a year ago, his current kow-tow (including a substantial French trade mission) to General Secretary Xi has been just as embarrassing. It will have allowed the Chinese to understand that as far as Europe is concerned, there is nothing to worry about. On the contrary, having also recently entertained Olaf Scholtz on a similarly doomed mission, the firm impression in Beijing will be that unlike the US and the UK, Europe is eager directly to coat-tail on China’s economic growth, and that both the EU and NATO are riven by deep strategic divisions.
Behind their thinly veiled diplomatic nonchalance, many of France’s NATO and EU allies were seething; even the Green Party German foreign minister Anna Baerbock (currently the German public’s top choice for Chancellor over her boss Scholtz) publicly refuted Macron’s stance on Taiwan on her own subsequent trip to Beijing, yet another European beating a genuflectory path to Xi’s door.
The dissent can only have added to the sense of satisfaction not only in Beijing but Moscow, Tehran and Pyongyang, all of whom are more closely aligned with each other than ever.
From an investment standpoint, geopolitics have taken something of a back seat for a while as investors focus on the economy. But they still rumble on in the background and it is worth keeping an open eye on events given their propensity to cause surprise in markets when they boil over.
The Jupiter Merlin Portfolios are long-term investments; they are certainly not immune from market volatility, but they are expected to be less volatile over time, commensurate with the risk tolerance of each. With liquidity uppermost in our mind, we seek to invest in funds run by experienced managers with a blend of styles but who share our core philosophy of trying to capture good performance in buoyant markets while minimising as far as possible the risk of losses in more challenging conditions.
Jupiter Merlin Portfolios
Multi-manager portfolios constructed to deliver a range of specific outcomes.
The value of active minds – independent thinking
A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.
Fund specific risks
The NURS Key Investor Information Document, Supplementary Information Document and Scheme Particulars are available from Jupiter on request. The Jupiter Merlin Conservative Portfolio can invest more than 35% of its value in securities issued or guaranteed by an EEA state. The Jupiter Merlin Income, Jupiter Merlin Balanced and Jupiter Merlin Conservative Portfolios’ expenses are charged to capital, which can reduce the potential for capital growth.
Important information
This document is for informational purposes only and is not investment advice. We recommend you discuss any investment decisions with a financial adviser, particularly if you are unsure whether an investment is suitable. Jupiter is unable to provide investment advice. Past performance is no guide to the future. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. The views expressed are those of the authors at the time of writing are not necessarily those of Jupiter as a whole and may be subject to change. This is particularly true during periods of rapidly changing market circumstances. For definitions please see the glossary at jupiteram.com. Every effort is made to ensure the accuracy of any information provided but no assurances or warranties are given. Company examples are for illustrative purposes only and not a recommendation to buy or sell. Jupiter Unit Trust Managers Limited (JUTM) and Jupiter Asset Management Limited (JAM), registered address: The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ are authorised and regulated by the Financial Conduct Authority. No part of this document may be reproduced in any manner without the prior permission of JUTM or JAM. 420