Are Markets Correctly Pricing In Political Risk?

The video discusses the pricing of political risk in Europe, particularly in relation to the euro-dollar exchange rate and the impact of US fiscal stimulus. It highlights the challenges in predicting political outcomes in Europe, such as the Italian referendum and French elections, and their effects on markets. The discussion also covers the transition from monetary to fiscal policy, the role of central banks, and the potential for increased market volatility as central banks reduce their asset purchases.

What recent event in the US has influenced the foreign exchange markets according to the transcript?

• A major fiscal stimulus

• A natural disaster

• A new trade agreement

• A change in immigration policy

Which political event in Europe is mentioned as a source of risk in the transcript?

• Spanish regional elections

• German elections

• Brexit negotiations

• Italian referendum

What is identified as a major problem for Europe and the euro in the transcript?

• Lack of structural reform

• Rising unemployment

• High inflation rates

• Trade deficits

According to the transcript, what has been the main actor in the markets over the last several years?

• Political leaders

• Private investors

• International organizations

• Central banks

What is the current status of the Fed's balance sheet as mentioned in the transcript?

• Stable and unchanged

• Rapidly increasing

• Significantly reduced

• Dripping a little bit lower