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Mama Mia! Italian Elections Continue The Anti-Establishment Trend

Tematica Research profile picture
Tematica Research

The results of the election last weekend in Italy continue the international trend of angry and frustrated voters dumping those in power, desperately seeking some way to improve their conditions. While many continue to trumpet an improving global economy, and there are some improvements to be sure, many nations have not yet recovered from the damage of the financial crisis.

The Brexit vote, Trump vote, weakened Angela Merkel in Germany, and this weekend's vote in Italy are all signs that voters in those nations want to see significant changes. Voters don't do that when they are satisfied with their pocketbooks today and opportunities for tomorrow.

Sunday, March 4th, Italians headed to the polls amidst an economic backdrop that has become increasingly frustrating. Economic growth in the nation has been weaker than many other European area nations.

Source: tradingeconomics.com

Even more telling is the weakening trend in per capita GDP.

Source: tradingeconomics.com

Italy's unemployment rate remains well above historical norms and well above that of Germany.

Source: tradingeconomics.com

Source: tradingeconomics.com

Youth unemployment has been even more grim, peaking at 43.40 in March 2014 after having been as low as 19.40% in 2007. This high level of youth unemployment has meant that the best and the brightest are much more likely to leave the struggling nation than to stay and fight an uphill battle.

Source: tradingeconomics.com

Wage growth (year over year) has been weakening for decades but has been sitting at record lows post-financial crisis, below 2% since 2011 and below 1% since 2016.

Source: tradingeconomics.com

The bottom line is, while the markets have been priced for sunshine and roses, we continue to see voters around the world frustrated with weak economies, poor wage growth, and the lack of opportunities to improve their circumstances. While the 2017 markets may have been a bit like watching a sunny

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Tematica Research profile picture
We see Investment themes at work and at play every day in the economy — oftentimes across industries and categories — and other aspects of day to day life. It is the opposite of the typical Wall Street approach to research, which oftentimes overly focuses on a single industry at a time and results in missed opportunities. These themes are identified by looking at the intersection of shifting economics, demographics, psychographics, technologies, mixed in with regulatory mandates and other forces. In other words, looking at the real world that companies are operating in! Some businesses will adapt, while others will leap frog ahead riding these thematic tailwinds to profits and significant share price movements, and sadly there will be those left floundering too. For every Apple, there is a Palm and Blackberry. For every Facebook . . . a MySpace or Friendster. For every Netflix, there’s a Blockbuster. The list goes on and on, even in non-technology categories. By examining these thematic tailwinds, our goal is to identify mispriced securities relative to the business opportunities ahead and avoid those that are overly valued and or staring down the barrel of significant headwinds

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Comments (3)

The number one driving factor (by far) in those long term graphs is population growth. In the 50s-70s Italy had fast population growth, and hence a relatively young population; now it has one of the most stagnant population growths in the world. Try backing out population growth from U.S. time series and see what happens.

This is also (ironically) the reason why the population is far less concerned with the country's economic performance than foreign observers believe. Salaries are stagnant, but people do not rely on salaries that much to fund their present level of consumption: the median Italian is an only-child homeowner with very high wealth due to the extremely high savings rates of the past two generations and very low households debt. Last time I checked the numbers, households' wealth was higher in Italy than in Germany, the U.S., France or the U.K.

The elections really driving theme was immigration. Read the Italian media or even better talk to Italians and you'll quickly realize it.
achilleus profile picture
Modern liberalism is failed quite utterly and has become only a shadow obsessed in things that were resolved in the 1960s
I'mTrying profile picture
When the middle class gets squeezed enough, hope fades for the future and goverments topple.
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