The article under consideration published at the beginning of the month in the Wall Street Journal illustrates the stock market dependence on political risks. The report closely relates to Chapter 6 in the “Bonds values and yield” section. According to Verlaine (2020), the U.S. stock index was raised earlier on a fiscal stimulus package’s expectations. Still, the news that Donald Trump has been tested positive for coronavirus has brought down the index. This, in turn, reduces the optimism of the markets, but Trump is not the only factor pulling the yields down.
Trump’s disease news increases market uncertainty, reducing demand for risky assets. This news could trigger a new wave of market volatility ahead of the election. Immediately after the announcement, the U.S. stock futures fell, while gold, yen, and treasury obligations, traditionally viewed by investors as defensive assets, rose. Besides, bond yields are affected by the decline of oil quotes and the data on the U.S. labor market. Therefore, the events which are a source of uncertainty and disquiet force investors to reduce risk positions, which, leads to a decrease in stock quotations.
To conclude, the article demonstrates what factors can cause bond value and yield fluctuations. The analysis of materials of such kind helps to understand the stock market system’s functioning as applied to real events. Thus, amid uncertainties over further fiscal stimulus, fears of new waves of coronavirus infection, and the forthcoming U.S. presidential election, the risk exists that the global economic recovery could be restrained.
Verlaine, J. A. (2020). Bond Yields Rise in Volatile Trading Day. Wall Street Journal. Web.