Trading the Dutch election

And here we go again… Yes, pretty much the same feeling we all had on June 23, when Britons hit the polls and voted to leave the European Union in a historic referendum. While in essence we are talking of different things, the Dutch parliamentary election present themselves as a similar event in terms of market sentiment.
On Tuesday, European stock indexes ended mostly lower as investors looked ahead of a political D-day for the bloc, while keeping an eye on the Federal Reserve interest rate decision.
Why this election is special? Simply said, because the Dutch election comes first in a sequence of general elections in Europe’s key economic powers, including France and Germany. Another issue is that all of the countries mentioned above are developing strong far-right movements which intend to follow Britain’s way by leaving the EU and strengthening their migration policies.
So far, the Brexit vote considered as an isolated event. But if new separatist parties take the lead at Europe’s main economies, troubles could be just around the corner.

The process
The Dutch people will vote today March 15 until 20:00 GMT when polling stations are expected to close, unless unexpected delays. While exit polls are published once voting is officially over, government results will available in the next morning, between 4:00 and 5:00 GMT. Political representation is always proportional to the results, making a coalition government a key requirement to govern. Negotiations between parties could take weeks or even months.
The parliament holds 150 seats of which a political party needs 76 so reach a sufficient majority to initiate functions. Therefore, the next government will possible be a mix of four to six parties, according to political analysts.

The candidates

• People's Party for Freedom and Democracy (VVD): 40 seats /// Candidate: current Prime Minister Mark Rutte.
• Labour Party (PvdA): 35 seats /// Candidate: current Deputy Prime Minister Lodewijk Asscher
• Socialist Party (SP): 15 seats /// Candidate: Emile Roemer
• Christian Democratic Appeal (CDA): 13 seats /// Candidate: Sybrand van Haersma Buma
• Party of Freedom (PVV): 12 seats /// Candidate: Geert Wilders
• Democrats 66 (D66): 12 seats /// Candidate: Alexander Pechtold
• Greens (GL): 4 seats /// Candidate: Jesse Klaver

The truth
Recent diplomatic tension between Amsterdam and Ankara has risen expectations for a positive far-right outcome at today’s election. But is that enough? The Freedom Party continues to accumulate voters and seats, although it probably won’t gather the necessary votes to rule on its own. And unfortunately, most parties have expressed little interest in forming a coalition government with them.

The trades
In case you want to position for a populist victory, they you should look into long positions for local bonds and safe-haven assets, and short on EURUSD and iShares MSCI Netherlands ETF.