Lessons From Quitaly
In hindsight, markets may have overreacted to Italian political risk, but the recent episode highlighted country-specific risk and the potential diversification benefits of high-quality fixed income broadly. Three months after Italy’s election, political uncertainty led to heightened concern that Italy’s populist coalition may try to pull Italy out of the European Union (EU) and Eurozone (countries that use the euro as their currency). The potential for Italy to be operating outside of the Eurozone prompted investors to reassess the risk of Italy’s government debt, leading to a large sell-off in Italian government bonds. Sho
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