US: Political risk driving economy lower - SocGen

In view of Kit Juckes, Research Analyst at Societe Generale, US political risk and the combination of weak productivity, low wage growth and a cautious Federal Reserve are dragging US bond yields and the dollar lower, but political risk has also triggered a sharp correction in risk sentiment and a bounce in volatility.

Key Quotes

“Recent experience suggests that market volatility will provide the Fed with all the more reason to tighten slowly, and that when it fades, investors will get back to selling volatility and seeking yield. That can’t go on forever, but as long as the US economy grows and the Fed dawdles, I very much doubt we are entering a new era.”