"If I was in the euro box, I would be agitating to say; hang on, they left and they seem better off, we're still stuck in this stagnant quagmire," she said. The threat of a break-up is real, according to Johnson, and "it's going to be a fascinating story.”
Johnson explained that she does not own anything in either core Europe or the periphery. “That’s mainly because if we’re in a world where things move largely in lock step or they even start to converge, core Europe is already at the low point and everything is coming down to meet it,” she explained.
In her view, investors would do better by looking at the UK, US or emerging markets.
“Europe has this unpleasant combination of being not that rewarding and laced with political risk,” she explained. “And you’ve got the referendum happening in Italy at the end of the year, so it feels like you will be taking quite a lot of risk for a relatively low reward.”
She also said the firm is thinking about buying sterling as the gap between the pound and the dollar is “ridiculously stretched” at the moment.
“We were short the pound, short the pound, short the pound… and we thought, okay the pound has now taken about as much of a beating as it’s likely to take,” she explained. “So it was time to start thinking about rebuilding a long position,” Johnson said.
Johnson added that she might be a bit more optimistic about the UK economy than the “doom-mongers” out there. “I actually think that the hockey stick, that bounce-back, could happen in the middle of next year. Things will be far better than people are expecting. And valuations are very, very extreme,” she said.