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Political uncertainty index at record high - how will you react?

Political uncertainty index at record high - how will you react?

The monthly Global Economic Policy Uncertainty Index, which has been published for the past twenty years,  hit a record high in November 2016 coinciding with the election of Donald Trump and the prospect of 'hard Brexit' becoming a reality.

At the end of January 2017, perceived uncertainty is still the third highest on record.

And that's before elections in France, the Netherlands and Germany get underway.

Here at Modern Investor, we're keen to understand how institutional investors are altering their asset allocation in response to the volatile political climate.

Are you seeking safe havens? Or are you steadfastly sticking by your long-term convictions? 

Tell us how you're navigating the choppy waters of 2017 in our 20 second survey.

‘One thing that investors don’t like is uncertainty,’ Chris Mellor, executive director at ETF provider Source, told Modern Investor earlier this month.

During uncertain times investors seek to allocate more money to asset classes traditionally perceived as safe havens.

‘You’d go to the sort of places you went in the first quarter last year or around Brexit events last year, such as government bonds or gold, which is a great place to hide’

But gold hit a 10-month low in mid-December as business sentiment improved while the dollar strengthened and stocks rose.

However, signs of so-called 'Trumpfaltion' are beginning to cool off  as markets decide which policy path the new US administration will take.

Until this is clear, seasoned investors such as Mohamed El-Erian, chief economic adviser at Allianz, have warned of a pullback in recent gains. 

He told the Finaincial Times on Tuesday; 'Stage three [in reaction to the US election] is a tug of war between protectionist and pro-growth influences — and it is a much choppier phase.'

 

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