Weekly Digest: Letter from Italy
31 May 2020
This week’s Digest comes to you from Italy, so it seems appropriate to pass some comment on the political situation here.
In the end, Italy was the one country that did hand the greatest share of the vote to an anti-establishment group, with the Five Star Movement (5*) capturing just shy of a third (I know that Emmanuel Macron’s En Marche! party was even newer, but it – and the president in particular – are cut from much more traditional cloth). A year ago such a result would have appeared catastrophic, but it’s fair to say that 5* had toned down much of its anti-Euro(pean Union) invective, probably as a reaction to the lack of ultimate success for the insurgents elsewhere in Europe. Still, the result is a major wake-up call for those who might have thought that the anti-establishment movement was on the wane. That view is reinforced by the gains made by the more right wing Northern League (strongly against immigration, seeking greater fiscal autonomy for the richer part of the country), who polled 17.4% of the votes against just 4.1% in 2013. In fact, perhaps the biggest surprise of the result was that the League (as they now style themselves, presumably to appeal to more southerly voters!) outscored Silvio Berlusconi’s Forza Italia (FI) party (14%), and were only 1.5% behind the Democratic Party (PD), who were the big losers with their share of the vote falling from 25.4% to 18.7%. This effectively gives the whip hand to the League in coalition talks involving the centre-right grouping (which includes FI and the League, and took 37% of the vote), a power-broking position they have never before been in a position to exploit.
|FTSE 100 Weekly Winners|
|Smurfitt Kappa Group||32.5%|
|FTSE 100 Weekly Losers|
|Paddy Power Betfair||-4.9%|
|Marks and Spencer Group||-3.1%|
Italy is a very young country compared to what it might deem to be its global peer group, and only became much as know it today in 1861. I was reminded of the ephemeral nature of seemingly solid institutions last week when presenting to clients at a City venue called The Ned. This imposing building was designed in the 1920s by Sir Edwin Lutyens to be the Head Office of the Midland Bank, and it was indeed my own branch for several years. The palatial interiors made the process of cashing a cheque (ha!) feel much less mundane than it might otherwise have done. Anyway, now it is a palace of hedonism, boasting no fewer than 250 bedrooms, ten restaurants, six private event spaces, rooftop swimming pool, spa, gym and a private members club (featuring a cocktail bar in the vault that starred in the James Bond film Goldfinger). I guess this is what is called “progress”, but I have to say that it all felt very “top-of-the-cycle”. Still, that won’t stop me taking my mother-in-law there in May for what is, by repute, a legendary Sunday lunch (which one has to book weeks in advance). All this by way of introduction to the fact that the presentation centred on politics (again), and I must say something about Donald Trump’s impressive and enduring ability to take us all by surprise. Last week I wrote about the bad Donald and his trade tariffs; this week it’s the good Donald and his announced plan to meet North Korean leader Kim Jong-un, potentially defusing decades of tension. Sadly, it’s this very inconsistency that investors find so trying, and so, along with the changing inflation and interest rate picture, it adds to the potential for more volatile markets. Finally, the cartoon characters name derived from the traditional anglicised form of Livorno in Italy was Foghorn Leghorn. This week, on which street was the first Warner Brothers Studio?
Year-to-date market performance
*Lagged to latest UK IPD Total Return All Property Index (Jan 2018)
FTSE 100 Index, past 12 months
Past performance is no indicator of future performance
This newsletter is for professional financial advisers only and is not intended to be a financial promotion for retail clients. The information in this document is for private circulation and is believed to be correct but cannot be guaranteed. Opinions, interpretations and conclusions represent our judgement as of this date and are subject to change. The Company and its related Companies, directors, employees and clients may have positions or engage in transactions in any of the securities mentioned. Past performance is not necessarily a guide to future performance. The value of shares, and the income derived from them, may fall as well as rise. The information contained in this publication does not constitute a personal recommendation and the investment or investment services referred to may not be suitable for all investors. Copyright Investec Wealth & Investment Limited. Reproduction prohibited without permission.
Member firm of the London Stock Exchange. Authorised and regulated by the Financial Conduct Authority.
Investec Wealth & Investment Limited is registered in England.
Registered No. 2122340. Registered Office: 2 Gresham Street, London EC2V 7QP.