EUR 23.44 For Business Accounts Only

The Weekly Track advent-2

- The Weekly Track – Advent by Bob Savage
http://track.com/articles/the-weekly-track-advent-2/

The arrival of the next new thing for markets and perhaps for politics is upon us. The rise of economic populism will continue to pester markets in the week ahead. So too will the price of bonds as the end of the 30-year rally in fixed income continues to pressure the great rotation trade back to equities and other assets. This, of course, ironically corresponds to the calendar as the days in the Northern Hemisphere grow darker along with the temperature lower. We all want peace, hope, love and faith – but find it increasingly hard to find in a more isolationist world. The Italian Referendum, the Austrian re-run election and the ECB Thursday are the key drivers for the week ahead, over and above, the ongoing US rate watch and “Trump Trade.” The FOMC meeting December 14th is taken a fait accompli for 25bps rate hike, with the news only in the forecasts for how much more “normalization” follows in 2017. The Austrian vote is a test of populism for the EU. In May's
election, which was annulled due to voting irregularities, Van der Bellen, of the pro-EU Green Party now running as an Independent, won by just 31,000 votes but opinion polls put Hofer, of the far-right Freedom Party, in the lead this time around with results not officially expected until Monday morning. A Hofer victory may trigger early elections for parliament with the Freedom Party likely leading with its Eurosceptic policy. The Italian Referendum is seen as 75% chance for a “no” vote with PM Renzi promising to resign, but there is no clear alternative. Furthermore, given the lack of polls being accurate – witness the US and Brexit - focus shifts to participation and the gulf of undecided voters as a guide. There are reports of a slight uptick in voting so far suggesting the “no” votes win. Exit polls will be published at 5pm ET Sunday with projections to follow but few expect real results until 9-10pm ET (Monday Morning for Asia). The ECB decision centers a
round the QE policy and extending its run along with potentially tapering the amount and broadening the universe of potential bonds to buy – with focus on EUR and the aftermath of the political noise from Austria and Italy in the background. All of which leaves markets torn between policy shifts, market shift and the larger power of politics as the next new thing for investors – call it what you may – Trumpflation or the end of globalization – both lead to higher inflation, lower bonds, volatile FX and higher commodities.