The Bank of England reacted strongly and swiftly following the Brexit referendum and although volatility soared in the aftermath, it quickly settled as the BOE made it clear that it was further prepared for action to reduce the volatility.
The European Central Bank made it clear in 2011 that it was prepared to do everything in its power to defend the Euro (and it has) with extraordinary stimulative monetary policy.
Market participants have come to rely on the central banks to be there to artificially prop up financial markets when they are experiencing the uncertainties that arise in the economic and geo-political arenas which might otherwise give rise to significant bouts of volatility.
While the Italian referendum may not have any immediate ramifications for the Euro, it puts the Italian political situation into question and clearly advances the populist movement that began with Brexit, gathered momentum in the US presidential election and has now permeated the Euzo Zone's third largest economy. Italy's banking crisis will not be resolved swiftly in this environment.
Clearly, without the "back-stop" of central bank intervention, this significant development would have created a great deal more volatility. Add in elections looming in France, The Netherlands and Germany in 2017.
So what is real?
Global trade is at risk and the economic advancement that would benefit export countries, like China and other developing nations as well as Germany (which has been a net beneficiary of the European Union) is also at risk.
In a nutshell, this puts the global economy at risk.
Trumpenomics (if he can advance all his desired proposals) might seem favourable for corporations with tax advantages offsetting higher operating costs, but without the continuation of global growth, US companies are going to run out of markets (where there is demographic growth) with which to sell into in order to continue to get revenue and earnings growth.
Populations are rising in developing nations and falling in developed nations. The 21st century is a very different world than was the 1980's where the next US government wishes to return us. It is not going to happen.
And central banks will not be able to forever protect us from the fallout.
Scott Tomenson,CIM Managing Partner, Chief Investment Strategist