On June 22nd I had the great pleasure of speaking with Ameera David on RT’s Boom Bust about Italy’s recent elections and Europe’s ongoing struggles, just on day before the United Kingdom holds a referendum on remaining within the European Union.
Rome has just elected its first woman mayor in nearly 3,000 years, the 37-year-old Virginia Raggi, who is a member of the Five Star Movement which was started by comedian Beppe Grillo. This election was highly representative of the challenges facing much of the western world. The campaign promises of those now in office have been forgotten and in their stead we get more of the same disappointing lackluster growth. Infrastructure from trains in Italy to roads in San Diego are in an embarrassing state, looking more and more like what one would expect to see in third world countries. Ms. Raggi campaigned on a platform of anger at frustration with the status quo, a sentiment that appeals to many across both the US and Europe, but her time in office is likely to be a big disappointment as Rome is a massive and incredibly complex city to manage and her background gives no confidence that she’ll be able to manage such an enormous challenge. I hope I’m wrong.
In the US, we have an unprecedented presidential election dynamic wherein the two presumptive candidates enjoy less support from within their own parties than has ever before occurred in modern history. In Europe faith in Brussels’ ability to help get economies within the union growing at a more tolerable rate are fading as is faith in the benefits of the European Union itself. The two largest economies on earth are experiencing heightened level of political turmoil that is likely to continue for some time, as the problems are structural and deep in nature, exacerbated by the aging demographics and under increasing pressure from the immigration/humanitarian crisis.
Things are going to get a lot more complicated before they get better. The asset price “put” assumed to exist through the omniscience and omnipotent of central bankers is becoming more tenuous. There are more and more potential major catalysts for a downturn out there, which means investors need to be prepared to manage heighten downside risks in a market that is already priced with a head-scratching level of optimism.