Potential volatility amid political uncertainty

Here's what we're thinking

August 29, 2017

Global markets have traded with a defensive tone over the past month as investors have been confronted by a series of geo-political headwinds triggering a wave of mild profit-taking in recent weeks. Events emanating out of Washington have dominated market sentiment thus far in August including intensifying tensions with North Korea, terrorist attacks in Europe as well as the White House’s response to the events in Charlottesville, Virginia. Amidst the reduced liquidity of late-August, we expect markets to remain hesitant as investors could look to lock in profits (one- year total return in local currency terms: S&P500: +13.4%, S&P/TSX: +4.7%) ahead of September’s important event risk. In particular, markets will be keenly focussed on the upcoming end-September deadline to lift the U.S. government’s debt ceiling and approve a new budget spending bill.

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