'Radical change' in government could lead stock market into 'period of uncertainty'

Brokerage firm XTB believes that a “radical change” in the government, which would result in the next government list not containing PS or PSD, could lead the Portuguese stock market into a “period of uncertainty”.

In an analysis on what actions the next government might take to mark a major change in stock market trading, XTB stated that “if the March 10 elections lead to a radical change compared to recent government periods, it leads to a solution if there is no PS or PSD, the market could Securities may go through a period of uncertainty.

Using a term of comparison, XTB equates this “uncertainty” to the day António Costa tendered his resignation as Prime Minister, on November 7th, a period in which the Portuguese stock market suffered “a significant rise in volatility due to future uncertainty”.

“A government implementing measures to reduce the tax burden on companies and households can have a positive impact on PSI performance,” says the brokerage firm. On the other hand, XTB warns that “implementing measures that increase the tax burden could lead to a compounding scenario.”

Regarding public debt, XTB states that governance “does not appear to have a direct impact on the interest payable, but rather is a result of policies related to increasing or reducing public debt and the revenue generation capacity of the state.” “.

“If we compare the yields between Portugal and Germany on 10-year bonds, we can see that their trend is very volatile.
Interconnected. Thus, we can conclude that the trend is determined by international markets and that the magnitude of the trends depends on the national macroeconomic results, in this case specifically on the ability of Portugal to meet its credit obligations,” highlights XTB.

Finally, the broker warns, “If there is a sudden change in policies where the country reduces its debt sharply, this could change that trajectory, in the same way that the opposite scenario in which the government brutally increases debt could escalate the crisis.” “Burden of debt.”