Not Brexit

So the results of Europe's weekend votes are in, and the protest movement went one for two.  In Italy, Renzi's Referendum was on the receiving end of a crushing defeat according to exit polls, and the prime minister has already tendered his resignation.   In Austria, meanwhile, the pro-European Alexander van Bellen swept to victory has the hard-right candidate has conceded defeat.   In a somewhat amusing irony, the losing candidate blamed Nigel Farage's interference for helping to cause his defeat.

The initial reaction has been to sell euros and sell equities.  But let's be clear: this Italian result is nothing like Brexit.   It was neither unexpected nor a journey into uncharted territory.   Indeed, political turnover has been a regular feature of Italian politics since the second world war, and there is little to suggest that we won't see another caretaker government (as indeed was Renzi's) until fresh elections are held in 2018.

Ironically, while the passage of the referendum would have been taken well by markets, in reality it could potentially have opened  a Pandora's Box by making it easier for the virulently anti-establishment 5 Star Movement to seize effective power.  By retaining the bicameral system that has been so effective over the years in rendering successive Italian governments toothless, the No vote makes it less possible for a demagogue to wield effective power.

So sell euros (and global stocks) all you want, but do so with eyes open.   There may be good reasons for them to go down (in the case of the former, we'll know more come Thursday), but thinking that this is Brexit or Trump mark II isn't one of them.