US: Chaos in Cleveland? – Westpac

Sean Callow, Research Analyst at Westpac, suggests that the markets also need to contend with summer political event risk from the US presidential campaign.

Key Quotes

“This week’s easy victory for Ted Cruz in the Wisconsin primary has seen oddsmakers trim the chances of Donald Trump winning the nomination. While he remains the favourite, the prospect is growing of the winner being decided at the Republican National Convention, set for July 18–21, 2016.

A contested convention has not occurred since 1976. While the most likely scenario for election day in November remains Hillary Clinton against either Trump or Cruz, the internal resistance to both Republican frontrunners leaves open the possibility of another, arguably more centrist candidate.

Since the Wisconsin vote, such talk has picked up. Anything seems possible in this year’s wild campaign so we can’t dismiss the chance (though low) of neither Trump nor Cruz representing the Republicans. A centrist choice such as Kasich or even House Speaker Paul Ryan could well spark a burst of optimism in US markets. If Ms Yellen’s current fears are justifi ed, markets will be in need of some good news by July.”