Although the various investors in the financial
markets doubtlessly pay great attention to important political events, such as
were a state in the E.U. to default on its bonds, I suspect that market
analysts overstate the importance of more commonplace political events. For
example, The New York Times reported
in late September 2012 that investors were shifting their portfolios to reduce
risk out of uncertainty regarding the upcoming American elections and the
ongoing negotiations in Congress to avoid the huge budget cuts and tax increases
set to begin automatically at the beginning of 2013 and run for a decade.
Additionally, fears that E.U. leaders might hesitate on moving forward with the
bailout program oriented to indebted states were prompting investors to be more
risk-averse. Generally speaking, analysts were “anticipating that politicians
may not act until forced,” both in the U.S. and E.U., “setting the markets up
for weeks of angst.” In my view, this account is overstated.
Does expertise on these make one an expert on politics?
The full essay is at "Investor Assessments."
Source:
Nathaniel Popper, “Fearing Fiscal Cliff, InvestorsCash In and Seek Safety,” The New York Times, September 28, 2012.