Brian Singer, co-portfolio manager of the William Blair Macro Allocation Fund, discussed how his Dynamic Allocation Strategies team uses geopolitical analysis (game theory) to assess how the Spanish elections create potential opportunities and risks in a recent Bloomberg interview. He believes that the Spanish equity market provides significant opportunities.
The investment team first uses fundamental analysis to identify value/price discrepancies, which reveal where opportunities exist. It’s the next step in the investment process where game theory helps the team evaluate and navigate geopolitical risks that impact market prices.
In the Bloomberg article, Singer discussed how he and his team use a game theory framework to analyze Spain’s political leaders to determine the likelihood of the pro-market Ciudadanos and incumbent People’s Party forming a coalition.
“Spain is a great opportunity,” Singer told Bloomberg. “Spain made tremendous strides to reform its banking sector and made a lot of progress throughout these years. The political risk is the only barrier to investment.”
Game theory analysis examines players’ objectives, which helps to create a framework for understanding their actions and communications. Singer noted that he believes the market is too pessimistic about Ciudadanos and People’s Party forming a coalition—and that Ciudadanos is the most likely party to concede in negotiations. “Ciudadanos has been slowly migrating towards the center, where it tries to establish itself as a viable center-right option,” Singer said.
The Bloomberg article also highlighted how Singer is using game theory analysis to better understand the motivations and actions of the Islamic State and Turkish President Recep Tayyip Erdogan, as well as how the migrant crisis and Greece’s debt negotiations could impact the eurozone and how the U.S. presidential elections could impact U.S. stocks.
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