-- A political shock in France has forced bond investors to confront the reality that the nation’s fiscal deficit is an issue for here and now, not years down the road.Morgan Stanley’s Wilson Says a 10% Stock Market Correction Is ‘Highly Likely’Biden Narrows Gap With Trump in Swing States Despite Debate Loss
Societe Generale SA says the spread has likely entered a new, higher range, especially because the left alliance was the surprise winner in the vote. Beyond France, the past month has hammered home the fragility of bond markets in places such as Italy, where spreads also have widened, and the US, where traders are betting on inflationary stimulus.
“The cat’s out of the bag as regards to fiscal deficits and the risk associated with that,” said Orla Garvey, a portfolio manager at Federated Hermes. “If we’re left with weaker governments that are less able to enact the changes they need to make in order to improve the debt trajectory, that’s going to be a difficult environment for spreads.
The UK has already experienced first hand just how quickly market sentiment can turn. Liz Truss served just 49 days as prime minister in 2022 after her plans for sweeping unfunded tax cuts sent shockwaves through the gilt market. The new Labour government has repeatedly told markets it will seek to exercise fiscal discipline.
“The question is about the medium-term: what can we expect in terms of policy? What can we expect about the deficit?” he said. “France has become the weak man of Europe.”Michael Moore Reveals His ‘Heartbreaking’ Conclusion About BidenIvanka Trump Resurfaces as Dad’s Re-Election Fortunes Change The stock market will drop 32% in 2025 as the Fed fails to save the economy from a recession, research firm says
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