US: Increasingly-unpleasant election campaign - Rabobank

Michael Every, Head of Financial Markets Research at Rabobank, suggests that louder noises came from the increasingly-unpleasant US election campaign, where Donald Trump was called a “Kremlin puppet” by Hillary Clinton’s campaign manager, while Trump himself called for a special prosecutor to investigate Clinton over the “criminality” of her e-mail scandal (as another 15,000 such mails were suddenly found by the FBI).

Key Quotes

“Most pundits agree what a wonderful advert for democracy this is all proving to be; I’d add almost as good as the prevailing economic consensus has been for the average voter, or the “bunch of Muppets” financial market action is likely to prove to be for the average investor in the long run. For now the Bloomberg US election poll tracker (taken from Real Clear Politics) currently has Trump on 41.5% and Clinton on 47%, though the gap appears to be narrowing slightly. Indeed, the latest single poll, by the LA Times/USC from 15-21 of the month, actually has Trump ahead 45% - 44%.

One would expect that at some point all these kind of noises from the election campaign might spill over into the financial markets. However, October looks a more likely date than August for that to begin. Nearer term, of course, no-one really wants to make any major commitment until we have heard from Janet Yellen on Friday, which is understandable. The title of her speech, “Designing Resilient Monetary Policy Frameworks for the Future” suggests we haven’t had resilient monetary policy frameworks in the past, which I’d say is true. However, we want to hear Yellen trumpet out where we go from here: does she still believe what she did in December, that US rates can be normalized slowly? Or will she argue for a dovish pastiche of the older tradition of rate normalization? Or will her message be as clear as the Swedish Chef? Patience is required until Friday regardless.”