Ulrike Rondorf, head of investment strategy at Lampe Asset Management, attributes the sharp sell‑off in European equities to both fundamental forces-most notably the energy‑price shock-and a distinct pattern of investor behaviour. She believes that large U.S. asset managers, reacting to the Iran conflict, are reducing their holdings in Europe and emerging markets. These institutions had only recently begun investing heavily in those regions, which had delivered strong returns in the first quarter, but now feel compelled to pull back during a geopolitical shock.
In a podcast with the “Handelsblatt”, Rondorf explained that “in such a shock moment the war tends to cause American investors to pull their money out”. The recent strengthening of the U.S. dollar hits the riskier currencies in emerging markets at an inopportune time, as those markets had been positioned for a prolonged dollar decline and had benefited from it. The euro fell below the 1.16 USD level on Tuesday; while this devaluation offers a helpful stimulus for European exporters, Rondorf notes that worries about higher energy costs continue to dominate market sentiment.
