This weekend is event risk heavy with German SPD vote and Italian general elections. The market, judging from short-term vol, has shrugged of any significant impact. Yet in the back of everyone mind is the “what if”. The last few year’s investors have been plague by “white swans” and this weekend is not different. The SPD is currently holding a binding postal ballot of its 463,723 members on a coalition deal with Mrs Merkel. Currently the SPD and CDU (Merkel) are expected to form a central market, EU friendly coalition. Politically Merkel has been allow a final chance as her own party voted in favor of a grand coalition deal with the Social Democrats (SPD). But if Sunday SPD votes to reject, German politics become a mess with no center coalition and possibly no Merkel. If SPD members vote "no" the most likely, result will be new elections or possibly a minority government. A snap election open the door for further gains for the anti-immigrations AfD party. The current low polling suggest a tilt toward “yes” vote and grand coalitions. The binary aspect of this event make it more worrisome in our mind.
By Peter Rosenstreich
