14 to 20 November: Un Cane in Chiesa

After the shock Trump election result, markets have seen some of the largest 2 week moves on record across a variety of assets. In this spirit, last week saw the second largest outflow from bonds since 2002 and a significant reversal of funds from Emerging Markets.

The next major event state-side is the FED meeting in mid-December. However, an interest rate hike is now all but priced in and we therefore see little chance for a major upset unless the market posts a meaningful, prior correction.

Instead, we think events in Italy could be of greater significance. The referendum on the 4th December is expected to fail (although who trusts polls these days!). This would lead to the resignation of Prime Minister Renzi and potential difficulties for the banking sector, which is closing on long needed capital raisings. We remain concerned about Italy over the medium-term given low productivity, high debt, inability to reform and the structural constraints of the Eurozone.

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