Today America chooses between Obama and Romney in a head-to-head match that has been held in suspense for weeks. A choice that is not simply between two candidates but between two opposing visions of the world. The wait also made itself felt on the price lists which moved cautiously awaiting the verdict. But what will happen to the markets after the vote? “Whatever the outcome, volatility will remain the dominant factor in the markets”, says Pier Alberto Furno, CEO and senior portfolio manager of Nemesis Asset Management, a London-based asset management company. “The reality – says Furno – is that nothing has changed and the markets will push to see the facts. Now we need to implement the programs, we need to go and test the results of the actions of the ECB, which will probably have to do more even if it now has little margin, and of the Fed. But I believe that neither Q3 nor Q2 had much impact on the economic data ”.
Many still wonder if the Fed's quantitative easing policy is having any effect or less concrete results on the economy: last week's data on new jobs, which grew more than expected, gave Obama a hand but did not convince the most critical. “After the American elections – says Furno – I believe we will need to focus on a more important economic recovery because up to now the QE policy has not had the necessary result. A Romney victory will lead to changes at the Fed level ending Bernanke and possibly QE policy. And the problem of the fiscal cliff will also have to be addressed“. In short, uncertainty will accompany us at least until the end of 2012 and the beginning of 2013. The US Congress is expected to pass on January 600: if an agreement is not reached in Congress on the fiscal cliff by that date, spending cuts will be triggered and tax increases of about 4 billion dollars, about XNUMX% of GDP, with recessionary effects on the economy. And the fear of the markets is that a narrow victory for Obama or Romney will produce a government too weak to end the fiscal cliff game without hesitation.
Especially since for Furno the markets have already risen too much compared to the conditions of the economy: in the USA they were driven by the liquidity effect of the Fed, in Europe they moved on expectations of a bailout for Greece and on the hope of a solution to the public debt problem. “The price lists are already at levels where they shouldn't be – notes Furno – We need to be realistic about the recession we are going through “. Which is complicated by a sovereign debt crisis that cannot be put right, while Italy is heading for spring elections which should close the caretaker government and leave room for politics, which does not exclude a twist in our situation whether the markets will be disappointed. "On the Italian stock exchange - notes Furno, however - I think it won't be so much the outcome of the elections that will have an effect but rather how the problem of Greece and the bailout of Spain will unfold".
However, Greece is still in chaos, paralyzed by a general strike on the day it arrives in Parliament the package on the austerity measures requested by the troika (the vote is scheduled for tomorrow). In Spain, the financial stability report released yesterday by the Central Bank signaled a strong growth in doubtful loans in the financial sector in the first half of 2012 to 194 billion euros, equal to an increase of 34,5% compared to June 2011. While Rajoy still hasn't lifted his reservation on his next moves: will he ask for help or not? Spain will ask for a European bailout only if "it is in the interests of all Spaniards", Rajoy said in an interview, reiterating however that at the moment, "the government has not taken any decision" pending knowing the conditions of the request. For the government, the economy will improve in 2013 and grow again in 2014, on the contrary, the newspaper El Pais reports that the EU's estimates are worse than those of the Spanish government: a draft by the EU Commission indicates that the 2013 GDP will mark a contraction '1,5% against the +0,5% expected by Madrid and in 2014 it will only grow by 0,5% and not by the 1,2% expected by the government.
But the Christmas present could come from Paris. “The one who will soon end experiencing rosy times is France, which until now has been seen as an alternative refuge. For now, the markets have trusted their words but the country hasn't done much and the knots will come home to roost”, Furno points out. So how to move on the price lists in this scenario? "Up to now we have remained very cautious, we have maintained very high levels of liquidity in the funds in order to take advantage of the opportunities offered by volatility and make purchases at more interesting levels than today - explains Furno, who adopts a value management and stock picking style – The most important factor in our experience are the renovation stories. The stories that caused the biggest burns are ignored and then instead represent the best opportunities. In 2002 it was the technology sector, today it was the financial sector. At, for example, has been much criticized and destroyed by investors but in our opinion today it is a beautiful story, it has been purified by the government and has already given us satisfaction". The US insurance giant overwhelmed by the subprime crisis and aided by the state has released the results in recent days. The parent company closed the third quarter with a profit of $1,9 billion compared to a net loss of $4 billion in the same period of 2011. Diluted EPS was $1,13 compared to a loss per share of $2,10 a year ago. The figure beat analysts' expectations of $0,88 per share.
