Black Swan

BarroMetrics Views: A Black Swan

Sometime in October or November, Italy will be going to the polls on a referendum called by Renzi. The referendum is for Renzi’s structural constitutional reforms. If the referendum succeeds, he’ll be free to carry out what appears to be much needed economic changes. If it fails, Renzi will step down – at least he has promised to do so. And, if he resigns, we may well see a parliamentary election that leads to Italy leaving the EU.

Unlike the UK, Italian participation in the EU is key to EU’s continuation. It is one of the core members and the third biggest economy. An Italian departure would lead to a break-up of the community.

What are the chances of Renzi losing the referendum? The polls suggest it is too close to call. And unlike the UK, I don’t follow Italian matters closely – so I have no personal assessment to rely on.

What I do know if there is a populist party, the 5-Star Movement, which has promised to withdraw from the Euro Zone if elected. It has won mayoral elections in Rome and Turin and is running even-stevens with Renzi’s PD party in the polls.

A loss to the 5-Star Movement under current conditions may well be the Black Swan that will bring about a decline in world stock markets.

We’ll see.

The post Black Swan appeared first on Ray Barros’ Blog for Trading Success.