“The uncertainty this brings will make it difficult for the banks to recapitalise and raises the possibility that the anti-establishment parties could rise in power through the next election,” he said. “The euro project could be threatened and Italian government bonds are going to be volatile. That being said, the result was widely anticipated and there could have been short positions covering these probable moves, while the ECB’s liquidity program will also continue.”
“Furthermore, support in Italy for leaving the euro remains low, notwithstanding this protest vote, so siren calls for the imminent demise of the Eurozone should be ignored,” Brain continued. “Unlike Brexit and the US election, investors may have been better placed for the outcome, but the longer term implications of rising anti-establishment parties keep the uncertainties high.”
So no need for investors to panic for now, but things can change very quickly in politics as we have seen.
