Dollars & Sense: Political Risks Remain Acute
- With the U.S. election in the rear-view mirror, markets are focused on a resolution of the fiscal cliff. A compromise on adjusting America's fiscal path should be reached, but fiscal restraint will constrain economic growth.
- Other political risks abound, such as the leadership transition in China and the ever-lasting European fiscal crisis. Concern over Iran's nuclear program is also a political wild card.
- Most likely scenario is that global financial markets will navigate through the risks. Accordingly, the lower-for-longer interest rate environment will likely persist, and moderate economic growth should be supportive to commodities and equities. In other words, recent developments have not materially altered our financial forecasts for foreign exchange rates, fixed income yields or commodity prices
