This weekend is event risk heavy with German SPD vote and Italian general elections.
The market, judging from short-term vol, has shrugged of any significant impact. Yet in the back of everyone mind is the 'what if'. Over the last few years, investors have been plagued by 'white swans' and this weekend is not different.
The SPD is currently holding a binding postal ballot of its 463,723 members on a coalition deal with Mrs Merkel. Currently the SPD and CDU (Merkel) are expected to form a central market, EU friendly coalition. Politically Merkel has been allow a final chance as her own party voted in favour of a grand coalition deal with the Social Democrats (SPD).
But if Sunday SPD votes to reject, German politics become a mess with no centre coalition and possibly no Merkel. If SPD members vote 'no' the most likely result will be new elections or possibly a minority government.
A snap election opens the door for further gains for the anti-immigration AfD party. The current low polling suggest a tilt toward 'yes' vote and grand coalition. The binary aspect of this event make it more worrisome in our mind.