European Stocks Could Slide 20% If Populism Spreads, MSCI Says

European equities could lose almost a fifth of their value if the influence of anti-establishment political parties spreads throughout Europe and the U.S. in the next two years, MSCI Inc. said in an assessment of possible risk scenarios.

The MSCI All Country Europe Index could slide as much as 19.5 percent if populist policies gain enough influence in Europe and the U.S. to reduce trade and increase government borrowing without a corresponding rise in revenue between now and 2018, the firm said. Speaking in its role not as an index compiler but as a consultant on systemic portfolio risk, MSCI cited results of a stress test it carried out on hypothetical multi-asset portfolios.