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Further upheaval ahead? An investor's electoral diary

Further upheaval ahead? An investor's electoral diary
November 17, 2016
Further upheaval ahead? An investor's electoral diary

With all this in mind, we have compiled a list of upcoming political events that have the potential to cause large shifts in financial markets and currencies. In September, we explained how investors can safeguard their portfolios from the shifting sands of global political upheaval, and below we briefly single out the likely impact for investors and the potential for shock. Above all, investors should be alert to the fact that all the preparation and research in the world cannot safeguard against political black swans, which do not reveal themselves until they happen.

 

4 December 2016: Italian referendum, Austrian presidential election

A big day for European politics. Italy will hold a referendum on constitutional reform, while Austria will re-do the May presidential election that was annulled after counting irregularities. Both votes are likely to have far-reaching implications.

The revision to the Italian constitution, whose broad aim is to end the intransigence of the republic's political system and make it easier for governments to implement their programmes, was once thought to be guaranteed. Things are starting to look a little tighter. That's because prime minister Matteo Renzi has pledged to resign if he loses the vote, meaning the referendum is being viewed by many as a vote on his government's failure to tackle anaemic economic growth.

In Austria, a victory for the far-right presidential frontrunner Norbert Hofer would serve as another blow to Brussels, and potentially to the Austrian parliament, which Mr Hofer has threatened to dissolve before 2018.

Affected: Italian banks, European banks, European equities, the euro
Potential shock factor: 7/10

 

20 January 2017: US presidential inauguration

All political stripes and vested interests will hope to have a better understanding of Donald Trump's plans before he enters the White House. But until he is sworn into office in January, the timing and details of the president-elect's policies may still be illusive. Given that the brief conciliatory remarks in his first post-election speech managed to cause wild swings in most major asset classes, expect early pronouncements to have similarly dramatic effects.

Affected: global equities, bonds, foreign currency, energy markets
Potential shock factor: 8/10

 

15 March 2017: Dutch parliamentary elections

Will the Brexit contagion spread? If the Dutch general election goes the way of the Party for Freedom (PVV) and its fervently anti-immigration figurehead Geert Wilders, that prospect will look increasingly likely. Mr Wilders, who currently leads prime minister Mark Rutte in opinion polls, wants to pull the Netherlands out of the European Union - the threat of which is likely to further embolden similarly Euro-sceptic movements across the continent.

Affected: currency, European equities
Potential shock factor: 8/10

 

23 April/7 May 2017: French presidential election

Last year, the Front National's attempts to form a bloc with Mr Wilders' PVV failed at the European parliamentary level, but the far-right French party's star has been on the rise domestically. In May, that will be put to the test when Marine Le Pen has a very good chance of making it to the second round of the presidential election, where she could either face president François Hollande or whoever wins the Republican nomination this month. Tactical voting, which defeated Mme Le Pen's father and sealed the election of Jacques Chirac in 2002, is likely to be a factor once again. But the political establishment has proved to be an uncertain bet of late.

Affected: currency markets, European equities
Potential shock factor: 10/10

 

27 August-22 October: German elections

By August - when Chancellor Angela Merkel's Christian Democrats will seek re-election - two of Germany's most important European allies could be sketching out plans to exit the EU. So while the German elections are unlikely to result in a populist-led upset, Ms Merkel's stance on immigration is likely to come in for severe criticism if the backlash elsewhere ends up threatening the single market.

Affected: currency markets, bonds, global equities
Potential shock factor: 6/10