Italian Elections 2022: Market Scenarios and Investor Interests

September 25 is the date to be marked on the calendar as the next general election, after the resignation of Mario Draghi as Prime Minister. There has been much discussion about the potential implications of this new scenario, and we at Investing.com have looked at it from a financial standpoint in particular.
But let’s start at the beginning, that is, when Mario Draghi, from February 13, 2021, assumes the leadership of the country after a rather insistent invitation from the President of the Republic, Sergio Mattarella.

The first key variable we always keep an eye on is the BTP-Bund Spread, the thermometer of risk relative to the Italian market, which corresponds to the difference between the 10-year German government bond yield and our 10-year BTP; the greater this difference, the greater our risk. Well, as the markets always anticipate everything, in the weeks prior to Draghi’s appointment (when his name was already circulating insistently) the Spread fell from about 122 basis points to a minimum of 86, practically a point never reached since then .

Likewise, when his resignation was announced at the end of July this year, this same differential went from 207 to around 262 (today we are around 235).

We, at Investing.com, then went to see the effects on searches and clicks on our site, from the height of our more than 2 million monthly unique users, relative to the Italian market, in all phases of the government mentioned above, so let’s see the results and the results of these searches.

We start with the period of February 2021 (Draghi’s rise to government), analyzing the weeks immediately before and immediately after his appointment. Well, from this initial research it appears that the most activity occurred within our forums, in relation to individual securities, because investors very often like to play each other, especially on these occasions. The most impacted forum was the one related to Stellantis (still seen as good old FIAT (BIT:)) with a 75.6% increase in clicks from January 15, 2021 to February 28, 2021, followed by from Gamestop (NYSE:) (we were in the middle of Memestocks then) with a 47% increase in clicks. Autogrill (BIT:) was also among the most popular stocks, up 22%.

To get to the present day, however, Italian large-cap stocks, notably Eni (BIT:), Enel (BIT:), Intesa and Bper, have seen the biggest increase in interest in the recent period. Click increases from July 18, 2022 to September 6, 2022 amounted to:

  • Beeper: +36.3%.
  • Enel: +46.7%.
  • Eni: +8.4%.
  • Intense: +37.9%.

This is because the stocks indicated, in particular Eni, Enel and Intesa, represent the main companies in the Italian market in the various sectors (energy, utilities and banking, respectively).

Since then, the Italian stock market is predominantly banking and financial, so it is clear that the variations in government bonds are indirectly linked to the price variations of the main institutions, which have always been closely related to local debt. . What can we expect in the coming weeks, before and after the elections?

Certainly, a lot of volatility, also because the party currently in the lead, that is, the Center-Right with Giorgia Meloni as possible prime minister, despite its more cautious tones towards Europe, still has to be interpreted by the markets, especially knowing the positions held in the past. Therefore, much will depend on the first weeks of government and the priorities set by the new majority, especially the energy crisis and the increase in the cost of living for families, the PNRR funds and structural reforms. Let us also remember that we are coming from a bear market that has lasted almost 9 months, so the general context does not help prices to hold. At the moment, the spread (which we have already mentioned above) seems to be under control, thanks also to the maneuvers and possible interventions of the European Central Bank, which has always said publicly that it is ready to support any moment of weakness in the different countries.

However, in many cases, with prices already down 15-20% since the beginning of the year, it is likely that further declines due to an initial phase of volatility under the new government could become buying opportunities, especially in those small and medium-sized companies that have always been synonymous with quality for Italy, I am thinking for example of the STAR segment.

The secret, as always, is to keep a clear head even in the most stressful phases, to diversify the portfolios and to always keep in mind that, at the moment, the market capitalization of Italy is less than 1% of the global value of equities, so this is a factor that should lead us to weigh exposure to this asset class more cautiously.

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