Italy ETFs: Political Heat Singes Stock and Bond Investors

Author: , Post Date: May 30, 2018

Cumberland Advisors William Bill Witherell Ph.D.

Excerpt below:

Italy is burning and Nero is not fiddling. Italian President Sergio Mattarella certainly pulled some strings, though, emerging from his office in Rome Sunday night to halt the birth of a government led by the anti-establishment Five Star Movement and the far-right League by vetoing Euroskeptic Paolo Savona as finance minister.

Bill Witherell, chief global economist and portfolio manager at Cumberland Advisors, recaps in a note published Tuesday morning: “Monday there was first relief in European governments and in financial markets that a populist government in Italy had been prevented, but this reaction soon was overtaken by the fear that the populist parties could emerge strengthened by these events if there is a new election. The drama thus continues.”

Of course, Italy’s problems don’t exist in a vacuum, and with its markets burning, the rest of Europe appears to suffering asthma. The iShares MSCI Europe Financials (EUFN) fell about 5.1%.

Witherell warns: “The evolving situation, particularly in Italy, requires careful monitoring, because systemic risks in the Eurozone appear to have increased.”

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