During late April and early May, the world was focused on the general elections in France. While the odds of a Marine Le Pen victory were quite small and a subsequent vote to leave the European Monetary Union (EMU) even smaller, investors were looking at France as a barometer of populism across Europe. And even though Emmanuel Macron won the French election, a significant populist risk still resides in Italy.

The market has recently taken notice for two reasons: because the French elections have now passed, and because of the rumblings that a new electoral law may soon be agreed upon in Italy. While the prior proposal was struck down in court, there are now rumors that former Italian Prime Minister Matteo Renzi is working in the background to coalesce around a proportional representation system similar to that of Germany.

If this change occurs, there will likely be an early snap election. And that possibility is spooking Italian markets—in particular financials—because Italy is the one country where a good deal of the population is in favor of leaving the EMU.

The Five Star Movement’s Eurosceptic stance and the strong desire to leave the EMU is what we consider the biggest risk in their agenda and the biggest risk to Europe currently.

The populist Five Star Movement is neck-and-neck with the ruling Democratic Party (PD) in recent polls. The Five Star Movement’s Eurosceptic stance and the strong desire to leave the EMU is what we consider the biggest risk in their agenda and the biggest risk to Europe currently. If they were to come into power, it increases the likelihood of a referendum similar to Brexit. And if the referendum passes, then global markets would have to face the potential dissolving of the EMU.

If an Italian snap election were to occur, the most likely time would be close to Germany’s September election. With such close proximity, investors would likely view the time between now and September with unease. And we are starting to see some of that unease already.

At this point, the established PD party has improved a bit to pull virtually even in the polls with the Five Star Movement. In the end, while we believe that Italy does hold significant risk to the EMU, this risk still has many obstacles that make it less than probable. Based on current polling, the Five Star Movement would lack an absolute majority. This would mean they would need to form a coalition, which would be a mighty task given that no other parties currently align themselves with the Eurosceptic populists. Additionally, it’s unlikely for the anti-EMU movement in Italy to win a referendum—not impossible, but also not likely. And even if the Five Star Movement won the snap election, Italy would need to change its constitution before it could even hold a referendum.

Uncertainty about Italy’s geopolitical situation is presently disturbing European markets. Longer-term, we think what evolves in Italy is among the most important global developments on which to currently focus. We will continue to closely monitor this geopolitical situation to navigate any investment opportunities or risks.

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Please carefully consider the Funds’ investment objective, risks, charges, and expenses before investing. This and other information is contained in the Funds’ prospectus and summary prospectus, which you may obtain by calling +1 800 742 7272. Read the prospectus and summary prospectus carefully before investing. Investing includes the risk of loss.

Any statements or opinions expressed are those of the author as of the date of publication, are subject to change without notice as economic and markets conditions dictate, and may not reflect the opinions of other investment teams within William Blair Investment Management, LLC or the Investment Management Division of William Blair & Company, L.L.C.

This content is for informational and educational purposes only and not intended as investment advice or a recommendation to buy or sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives, guidelines, and restrictions.

Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Investments are subject to market risk. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be interpreted as investment advice, as an offer or solicitation, nor as the purchase or sale of any financial instrument. Statements concerning financial market trends are based on current market conditions, which will fluctuate.

William Blair does not provide legal or tax advice. Please consult your tax and/or legal counsel for specific tax questions and concerns.

Distributed by William Blair & Company, L.L.C., member FINRA/SIPC.

Copyright © 2019 William Blair & Company, L.L.C. "William Blair” is a registered trademark of William Blair & Company, L.L.C. No part of this material may be reproduced in any form, or referred to in any other publication, without express written consent.

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Please carefully consider the Funds’ investment objective, risks, charges, and expenses before investing. This and other information is contained in the Funds’ prospectus and summary prospectus, which you may obtain by calling +1 800 742 7272. Read the prospectus and summary prospectus carefully before investing. Investing includes the risk of loss.

Any statements or opinions expressed are those of the author as of the date of publication, are subject to change without notice as economic and markets conditions dictate, and may not reflect the opinions of other investment teams within William Blair Investment Management, LLC or the Investment Management Division of William Blair & Company, L.L.C.

This content is for informational and educational purposes only and not intended as investment advice or a recommendation to buy or sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives, guidelines, and restrictions.

Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Investments are subject to market risk. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be interpreted as investment advice, as an offer or solicitation, nor as the purchase or sale of any financial instrument. Statements concerning financial market trends are based on current market conditions, which will fluctuate.

William Blair does not provide legal or tax advice. Please consult your tax and/or legal counsel for specific tax questions and concerns.

Distributed by William Blair & Company, L.L.C., member FINRA/SIPC.

Copyright © 2019 William Blair & Company, L.L.C. "William Blair” is a registered trademark of William Blair & Company, L.L.C. No part of this material may be reproduced in any form, or referred to in any other publication, without express written consent.

Statement of Financial Condition | NMS Rule 605 & 606 | Business Continuity Plan | UK Stewardship Code
Cookie Policy | Social Media Disclaimer | Privacy & Security | FINRA’s BrokerCheck

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