By Elwin de Groot, head of macro strategy at Rabobank
US Treasury yields drifted higher yesterday after the Financial Times writes. In Europe, it is the winter-demand pressure that hangs over the market. The underpriced risk is that Europe’s own weather stress raises gas burn through the power sector just as LNG supply risks remain elevated, our senior energy analyst Florence Schmitt hacking reports and Yet uncertainty is more than merely a transmission channel for shocks. It is an economic force in its own right. Franklin D. Roosevelt famously captured this during the depths of the Great Depression when he declared in his first inaugural address that "the only thing we have to fear is fear itself". Nearly a century later, the insight remains remarkably relevant. Uncertainty can paralyze decision-making, delay investment, encourage precautionary saving and ultimately amplify the effects of whatever shock triggered it in the first place. An interesting ECB Groundhog Day Economics: markets seem to become more accustomed to geopolitical disruptions, yet every recurring script carries the risk of a very different ending. Interestingly, the same logic may apply in reverse. As our colleague Stefan Koopman argues If uncertainty depresses activity, improved confidence can temporarily support it. The key word, however, is temporarily. The lesson from both the ECB's research and recent market experience is that confidence effects can move demand forward in time, but they do not permanently raise an economy's growth potential. Lower precautionary savings may provide a one-off boost to spending. Positive sentiment may temporarily lift GDP. But neither changes the underlying supply capacity of an economy. Ultimately, uncertainty may rule the headlines, and confidence may shape the near-term cycle. But lasting prosperity still depends on a far less fashionable ingredient: stronger supply-side growth.