It finally happened! 2019 has taken financial shape; albeit the shape of a strangely turbulent yet solid year.
The aftershocks have not been lacking, but the markets have shown definite signs of resistance. If this were not the case, the political and economic events of the last few weeks (September will be a difficult month to forget) would have been unlikely to pass without serious consequences.
How are the markets going?
We have good news. Despite the turbulence of the last few weeks, the markets have had a measured reaction: very few and light losses, and steady gains. Since the beginning of the year, the respective balances of the main stock market indices have all been positive: the Americans (Dow Jones, + 16%; the S & P500 + 19%; Nasdaq, + 24%), the Europeans (the Stoxx Europe 600, + 15%), and the Italians (Piazza Affari has grown by 19%).
What the markets did not expect (but feared)
1. The attack on Abqaiq
The military attack on the Arab oil production plant Abqaiq, which produces 5% of the world’s oil, surprised the world and its markets. The attack may have repercussions (which have, for now, fortunately been averted) on the price of fuel, and equally adverse effects on the political and military balance of the whole region; given that Saudi Arabia and the USA have accused Iran of authoring the attack.
2. The Brexit deadlock and Boris’s slap from the Supreme Court
Less than a month from the (new) date set for the UK's exit from the European Union, and only a few days since the Supreme Court ruled that Boris Johnson’s prorogation of parliament was unlawful, no one is able to say what will happen in and around London. Not even the markets, which don’t venture forecasts and instead have chosen a prudent stasis.
3. The Impeachment procedure against Donald Trump
The third big unknown that materialised in September, concerns the impeachment inquiry of Donald Trump. He has been accused of committing a serious abuse of power by blackmailing the president of the Ukraine, Vladimyr Zelensky. According to the accusations, Trump promised economic aid to Kiev in exchange for opening an investigation into Hunter Biden, son of the Democratic presidential candidate, Joe.
The ramifications of this scandal reach far beyond just Trump and his immediate circle; who risk being put on trial by congress. They also impact the Democrats, and Joe Biden himself, who despite being the fundamental victim of the situation is already suffering in the polls.
What the markets expected (and wanted)
1.Renewal of QE in Europe
The European Central Bank has announced the new massive government bond purchase plan for European countries. On the one hand, the measure was expected to the point of being taken for granted; on the other, it surprised investors both due to its indefinite duration, and the amount of securities that will be purchased monthly (less than expected: 20 billion against the 30-40 that was anticipated).
2. The Fed rate cut
The US Federal Reserve has cut interest rates on the cost of money by 2%; a rather controversial measure. Its critics point to its beneficial timing for Trump and his electoral campaign, whereas its supporters believe that by doing so, the US Fed has safeguarded the accounts against any possible disruption from the next electoral campaign.
3. The “Conte 2” Government
Political opinions aside, the stock exchanges (which, as I have already said, have no political allegiance, only that for a stable government) have shown signs of appreciating the new majority in Italy. For example, the spread, which gives an idea of the confidence of the markets in Italy, is now stable at around 140. This is exactly half of what it was in May, when it had exceeded 300.