The upcoming March 4th Italian election poses a clear and present threat to the stability of global markets and the European marketplace in particular. However, there is not much commentary about the situation in the financial press or other major media. This is particularly telling to us since we know that the media has been extremely willing to pull out its most positive and persuasive coverage for the candidates favored by the status quo, such as Macron in France.
Macron’s election was in many ways a textbook example of the concerted effort of media to lavish praise on one candidate over the opposing party, yet fail to adequately acknowledge the potential backlash that Macron would generate after his election. It is no secret that Macron’s sweeping defeat of Le Pen and the assumption of majority by his newly formed party was quickly followed by a huge drop in public approval for him after he took office and demonstrated (as we had stated in our commentary before his election) that he was not representative a new political ideology, but rather a very clever repackaging of the status quo.
Europe now, as then, is in the middle of strong political turmoil. Opposition parties are gaining substantial ground as the current European establishment, including in Germany, which was once seen to be practically impregnable by commentators and political analysts. But it is Italy that poses the greatest threat, given that there is a clear swaying of the public against the European Union, and against globalism in general. This is finding strong expression in strong backlash to mass migration, something that again we stated back in 2016 was going to be a dominant factor in driving a wedge into EU politics. And now, at least three anti-EU, anti-globalist parties are appearing to be the likely victors of the lastest race.
While we will not say that we know what the outcome of all of this will be, we can declare without question that there is serious risk here which, thus far, has not been reflected in equities prices or in the VIX. Instead, the markets across the globe appear to be certain that nothing will come of this sudden cultural and political shift in the attitudes of EU citizens. Therefore, keep an eye on the Italian election’s build up to March 4th as we might be setting up for one of the biggest surprises in EU politics since Brexit.