June 8, 2016 – Corriere della Sera published an editorial by SEP Senior Fellow Lorenzo Bini Smaghi, in which he discusses the current effects of the upcoming Brexit referendum on the markets. Beyond economic uncertainty, investors are also concerned about political developments. A defeat of the “Remain” campaign, or even a close victory, could lead to the departure of Prime Minister David Cameron and his Conservative Party. For investors, a possible regime change almost always leads to increased caution and a general divestment of more risky positions. This means a return to more liquid and secure assets, despite lower returns. However, the ECB’s expansive monetary policies have reduced instability somewhat, especially through their bond-buying program (Quantitative Easing). Looking beyond the referendum, the American presidential elections and the French presidential primaries are both scheduled for 2017, coinciding with the possible end of Quantitative Easing in March. None of these disruptions should be underestimated.
- The original article (in Italian) is available from Corriere della Sera.