US

In general, investors are concerned about political content. Fiscal changes adjust the relative performance of different sectors of the economy, and markets react accordingly. But the current US administration has added two complications. Politics is less predictable and seems more likely to have unwanted consequencesreports the economist of UBSPaul Donovan.

The perception of politics professionalism could become a focus for investors

“Erratic policy decisions in a variety of areas have added a risk premium to the US economy. Political decisions can be quickly reversed, and there are fewer signs about what these decisions will be. In the past, investors were guided by the opinions expressed by members of the cabinet and senior officials as a guide for the evolution of the policy. With the decision making centered both in an individual, those signs are of limited aid today in limited aid today day.”

“The fact that political decisions have been made rapidly, by people who do not always have previous experience in the government, has introduced unwanted consequences, either forcing reversals of policy or causing economic disruptions. Even if those consequences do not affect areas in which investors focus, they send a signal on how policy is formulated. The perception of the professionalism of the policy could become a focus for investors.”

“Financial and economic models tend to operate with quantifiable inputs. Introduce unpredictability and unwanted consequences eliminates any claim of precision in the forecast of the US economy. Therefore, the weights assigned to the risk scenarios are higher than normal.”