Angela Merkel's victory in this weekend's German election does not necessarily mean populism is dead.
While Merkel's centre-right Christian Democratic Union and its Bavarian sister party the Christian Social Union won a third of the vote, this represented a decline from the 41.5% they achieved in the 2013 election. It is also their worst showing since 1949.
Meanwhile, the far right AfD party attracted 13.5% of the vote, cementing its place as the third largest party in Germany. The result triggered anti-facist protests in the country.
While Merkel's victory came as no major surprise to Newton fund manager Nick Clay given the Germany economy has been a major beneficiary of the European project, its the emergence of the far right that gives him reason to believe populism may not be finished.
Clay, who manages the Newton Global Income fund, said any positive reading of the result taken by markets could be 'premature'.
'It has been the case that since Macron’s victory in France, the markets have decided that this was the turning point of the populist uprisings and that the political landscape is returning to normal. Brexit is simply a one off, a misconceived mistake,' Clay said.
'[However] we think this could well be a misplaced belief with the better than anticipated score for the far-right party AfD emerging as Germany’s third-strongest party. Macron was a complete outsider, unknown in political circles a year ago, who ended up winning.'
Clay said this chimes with Trump (while acknowledging the approaches are very different) because both are a vote against the incumbent parties.
'The people are still voting for change and something different, as the status quo is not working for them. Brexit too, was an expression of this, as was the UK election,' Clay said.
'Therefore, we contend that is would be dangerous to extrapolate the re-appointment of Merkel as the end of populist change, just as we think it would be to cast the upcoming elections in Italy next year, and Catalan’s potential vote, as risk free. Change is still needed and will be demanded.'