According to Saxo Bank’s head of commodity strategy Ole Hansen, one measure of political risk is at its highest level since 2003, during President George W. Bush’s invasion of Iraq.
Much of the recent political worry has centered on the musical chairs in the White House, with a number of high-profile Trump administration departures elevating concerns about turmoil in Washington, which threaten to upend the administration’s pro-business agenda.
Meanwhile, other macro analysts are pointing out increased risk tied to Special Counsel Robert Mueller’s investigation into members of the Trump campaign’s links to Russia in the lead up to the 2016 presidential election.
Mark Rosenberg, co-founder of quantitative research firm GeoQuant, says his gauge of political risk, dubbed the Mueller Risk Index, suggests that increased risk associated with the special counsel’s probe, including a possible impeachment, may actually help the dollar.
That’s a bit contrary to the consensus view, particularly since U.S. stocks enjoyed a stellar showing last year while the buck, as measured by the ICE U.S. Dollar Index, lost 10% of its value gauged against a half-dozen rivals.
Rosenberg said that “what’s new is that the dollar is less resilient than one would expect for a global reserve currency. Indeed, the U.S. political economy increasingly looks more and more like an emerging market; we should anticipate similar risks to emerge.”
With the dollar continuing to lose value and an increased sentiment that something is on the horizon that could drastically effect the stock market, it has never been more important to be proactive and look to diversify before its too late.