No Olympic truce for financial markets
Last month, we made lengthy comments on the French political situation and the uncertainties created in the wake of the 1st round election results. Not surprisingly, no single party or coalition were able to secure an absolute majority after the 2nd round results, the finish order came nonetheless a bit as a surprise. After a few days of errand, the focus quickly shifted to the United States, where the period was quite busy, with the failed assassination of Donald Trump, a Republican convention with messianic overtones, and an increasingly isolated Joe Biden forced to step down in favour of Kamala Harris... With so much uncertainty, we might have expected a few jolts on financial markets. That was far from obvious, with equity markets continuing on their upward trend, at least the first two weeks, the end of July proving a bit more volatile... Beyond the renewed political uncertainty, quiet financial markets warrant some caution : fixed income markets are resilient till they are not and deleveraging and unwinding JPY carry trade positions, as well as markets rotating out of mega cap tech stocks remain volatility factors that are likely to create unpleasant side effects for investors. We are detailing these ideas in this newsletter.
