NEW YORK, NY May 11 (DPI) — Greater volatility in both the US stock and bond markets is a likely by-product of a presidential campaign that promises to be wildly entertaining – but, from a financial-markets standpoint, dangerously unpredictable.
Donald Trump has pledged to continue to provoke the Republican establishment, while he makes more off-the-cuff pronouncements about barring Muslims and reducing public debt by default.
The US financial markets have for years learned to live with political and policy uncertainty – but political chaos is something else. And political chaos, while entertaining and the source of higher ratings for cable networks, could spell trouble for the US financial stability.
By all accounts US stock market indexes, still resilient at or close to all-time highs, looks increasingly vulnerable, as more and more analysts point out that recent growth has been driven by financial moves like cost-cutting and mergers, rather than organic economic activity. Job growth, too, has stalled.
Moreover, the US bond markets continue to yield negative real returns almost 10 years out the yield curve, an almost unprecedented development.
While the Federal Reserve has exercised control over short-term rates – for years now kept at or close to zero – longer-term rates are driven by, at least in part, by market forces that could drive up 10-year and 30-year rates at any time.
http://finance.yahoo.com/echarts?s=%5EVIX+Interactive#{“range”:”5y”,”allowChartStacking”:true}