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Mid-Term Pause

06 November 2018 by lberuti

The election cycle in the US means we are never too far away from either a presidential or a mid-term election. Preparation also seems to go on for an age, such that it is a wonder politicians actually have any time left to govern, and the fervour generated at political rallies is something quite impressive. But, as far as they are concerned, during the few sessions heading into mid-term election day, markets have been focusing elsewhere. Despite the uncertainty surrounding the outcome of the vote – will the Republicans retain the senate? will the Democrats regain control of the House -, markets have in general been focusing elsewhere and were busy erasing most of the risk premia widening that we experienced since the beginning of October. Today was no different and all credit indices put in a decent performance, but volumes were thin and stood at roughly half what they usually are. Investors still assume the probability of a sharp sell-off is restricted, but they also suspect the outcome of the US mid-term elections is likely to provide some noise. They decided against going all in… yet.