Yes, regime uncertainty is a real factor suppressing economic growth:
Institutional investors fear a government policy mistake far more than inflation, terrorism, a housing double dip, a weak dollar, poor earnings or any other potential risk to the economy, according to a survey of 100 mutual fund, hedge fund and pension fund managers by Citigroup Global Markets.
“Government Policy Missteps” garnered more than a third of the participants’ votes as their biggest fears in the quarterly survey, ahead of the more than 15 percent who cited “Protectionism,” which is also strongly-tied to the actions of the Administration and Congress.
But these very same investors are bullish on the market and plan to buy stocks this quarter because they believe the chances of that policy error will decrease if Republicans take back the House of Representatives in November.
When investors and entrepreneurs don’t trust that the rules will stay the same, they are reluctant to invest. (It’s all part of that “rule of law” stuff.)
(Via Big Government.)
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