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Political Uncertainties Dominated Markets Last Week

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Political uncertainties dominated markets

Markets around the world saw choppy trading last week as a result of the Trump, FBI, and Russia drama. US markets had the worst trading session so far this year on Wednesday, May 17, 2017. The S&P 500 (SPY) fell 1.8% on a single day. The sudden rise of market anxiety was triggered by reports that former FBI director James Comey, who has been fired by President Trump, kept memos about his meetings with Trump. These notes could lead to further investigations surrounding Russian involvement in the US elections.

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Volatility on the rise again

Volatility (VXX) in the global markets has subsided in recent weeks with the S&P 500 VIX (VIXY) reaching a low of 10.1 on May 1, 2017. Such low volatility levels haven’t been seen in the last two decades, but the series of Trump-related events on May 17 drove the index up 46.4% in a single day to 16.3. The VIX Index has since cooled off as markets gained some ground by May 19. The VIX Index closed at 12.04 for the week ending May 19.

Markets began to question Trump trade, which has been driving the markets since the US elections in November. Investors feel that allegations and scandals are likely to impact the roll-out of the much-anticipated infrastructure (PKB) and tax reforms. This shift in sentiment is likely to further slow the growth of equity markets in the near term.

Series overview

In this series, we’ll analyze the reaction of equity (VTI), currency, and fixed income (BND) markets to the new developments surrounding Trump, the FBI, and Russia.

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