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Since the beginning of the decade, problems in Europe have occasionally drifted across the Atlantic. If it’s not Greece, it’s Portugal. If not Portugal, it might be Italy or Spain, and if not Italy or Spain, Brexit briefly created turbulence in 2016.

More recently cracks in the European financial system have taken a backseat to firmer growth on the continent, but problems are simmering just below the surface in the form of an economic crisis in Italy. Enter the dysfunctional nature of Italian politics and the two anti-establishment parties that took top honors in an early March election. A coalition was eventually formed between the two groups, but the president of Italy rejected a finance minister who has expressed doubt about the euro, which unites much of Europe.

How does this affect your investment strategy all the way across the Atlantic? Concerns the government might ditch the common currency led to a massive spike in Italy bond yields and a global sell-off in stocks the day after the Memorial Day weekend. We could see new twists and turns, but for now cooler heads have prevailed. Yields came off highs as government officials salvaged the coalition and staved off new elections later this year. My synopsis is simply a thumbnail sketch of events, but you may be asking, “Why the overview of what is only the latest in decades of dysfunctional Italian politics? Why should I care?”

First, it’s a reminder that Europe’s ongoing financial problems haven’t been solved, and what happens during this Italian economic crisis can potentially trigger uncertainty among U.S. investors…at least temporarily.

Should you be concerned?

Italians aren’t clamoring to get rid of the euro. If it were to happen, it would have enormous consequences for Italy, which would then reverberate throughout Europe. We’d likely see a run on Italian banks, as citizens moved cash to safer shores. The collapse of Italian banks would roil the European financial system, and its impact would likely be felt around the globe.

Yes, we are interconnected today. But odds of a “Quitaly” or “Italexit”– financial commentators are once again trying to coin a new term–remain low. Yet now it’s on the radar.

If nothing else, the drama over the economic crisis in Italy is simply a reminder that Europe hasn’t solved its financial problems and there is a chance these problems could affect American’s investment strategies..

I hope you’ve found this review to be educational and helpful. The information contained herein is based on sources and data believed reliable but is not guaranteed. This is not an offer to buy or sell securities. Past performance does not guarantee future results. If you have any concerns or questions, please feel free to reach out to me. That’s what I’m here for.

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Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Dechtman Wealth Management, LLC [“DWM”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from DWM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. DWM is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the DWM’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.dechtmanwealth.com.

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