Vive la Euro: Western European Cyclical Re-acceleration to Continue

European/Italian Banking System Easing on Net While Italian NPLs Remain a Concern

U.S. healthcare policy note: Over the weekend, I spoke to a friend who is a healthcare benefits consultant to various Fortune 500 companies. He noted that while the 1st and 2nd iterations of the AHCA received significant attention from CFOs and human resource managers, the 3rd iteration, which was passed by a House vote of 217-213 on May 4th, did not. This is not surprising, as the 3rd iteration has received significant negative coverage; moreover, nearly all major patient-advocate and medical groups such as the AARP, the American Medical Association, the American Cancer Society and the American Heart Association, have issued statements opposing the third iteration of the AHCA. In response, Senate Republicans have already stated that they’re “starting from scratch” and “to draft our own bill.” As such, it will take weeks and many amendments before the Senate will vote on the bill; most likely, the vast majority of Obamacare will be kept in place. Charlie Munger, a long-standing Republican, is explicitly predicting a single-payer system for the U.S. (eventually) in an interview the day after the Berkshire Hathaway’s annual meeting.

Vive la Euro: European investors to become more bullish with Macron victory in French run-off election. As of this writing, the euro was steady against the US$, while gold is up +0.2%. The euro has not reacted positively to a Macron win as both polls and investors had already factored a Macron win into asset prices last week. E.g. Western European stocks rose by +3.5% (in US$ terms) while European financial stocks were up +5.1% last week. The euro VIX, meanwhile, remained steady (see Figure 1 below).