The Effects of Political Uncertainty
The wall of worry helps markets climb higher, but uncertainty generally causes volatility, which may create adverse market conditions. When there is political uncertainty where a country or commonwealth can default on debts to investors, chaos may follow. While investors always crave a pure Goldilocks environment, they are often met with times when political uncertainty will strike.
In 2015, there have been a number of political issues that have generated market volatility. On Tuesday July 14, Iran and the U.S. announced a nuclear arms agreement that helped push down the price of oil over the past 2-weeks. The outcome was in question the entire way, but traders had priced in an agreement and short covering ensured as investors sold the rumor and bought the fact.
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