Political Risk Looms as Market Volatility Expected: UBS Expert

UBS' Kiran Ganesh warns of increased volatility in markets due to political risk, which is not currently priced in. Uncertainty surrounding France's government and US Fed policy are key concerns. Investors should prepare for short-term volatility.

In a recent analysis, UBS' Kiran Ganesh cautioned investors about the potential for increased market volatility due to political risks that are not yet fully priced into the market. The warning comes at a time of heightened uncertainty surrounding the stability of France's government and the U.S. Federal Reserve's policy stance.

According to Ganesh, the political turmoil in France, where the minority government faces a confidence vote on September 8, is a significant concern. The opposition parties have indicated they will not support Prime Minister Francois Bayrou's budget cuts, raising the possibility of a government collapse. This political instability could lead to short-term market volatility, with French stocks and bonds potentially experiencing further declines [2].

Moreover, the U.S. Federal Reserve's independence has been a subject of ongoing debate, with President Donald Trump threatening to dismiss Fed Governor Lisa Cook. This unprecedented move has fueled investor concerns over the Fed's ability to conduct independent monetary policy. The potential reshaping of the Fed's rate-setting Federal Open Market Committee (FOMC) could have implications for interest rates and the broader economy [2].

Ganesh advises investors to prepare for short-term volatility, emphasizing the need to monitor political developments closely. For France, investors should keep an eye on the confidence vote and the subsequent budget negotiations. In the U.S., the focus will be on the Fed's policy decisions and the potential impact on interest rates and the dollar.

In conclusion, while the long-term prospects of the markets may remain intact, the immediate risks of political volatility cannot be overlooked. Investors should remain vigilant and be prepared to adjust their portfolios in response to these evolving risks.

References:
[1] https://www.ainvest.com/news/snap-snap-corporate-accountability-market-volatility-wake-earnings-misalignment-2508/
[2] https://www.reuters.com/world/china/global-markets-wrapup-1-2025-08-26/