The Most Important Development Today for the Markets Had Nothing To Do With Mueller
Author: Greg Valliere
April 18, 2019
— Special Edition
THE MUELLER REPORT WILL BE DEBATED for years, an endless political distraction, but our focus is always on market implications — and there was a really huge development this morning: a red-hot retail sales report that not only rules out a recession but boosts our belief that the economy could over-heat.
THE 1.6% JUMP IN MARCH retail sales raises the possibility that first quarter GDP growth could approach 3%; minutes ago, the Atlanta Fed just hiked its forecast to 2.8%. With the labor market still exceptionally tight, there’s virtually no chance of a Fed rate cut any time soon — and a rate hike in the second half is now back on the table. Donald Trump and the Fed will remain at odds.
WITH ENORMOUS MONETARY AND FISCAL STIMULUS in the pipeline, we think 2-1/2% GDP growth this year is a low bar to clear, which is more than enough to absorb new entrants into the labor force. The biggest theme of the year for the markets? The economy surprises to the upside.
AS FOR MUELLER’S REPORT, this saga is far from “game over,” as Trump proclaimed this morning after his extremely loyal Attorney General seemed to absolve him of all wrongdoing. There’s plenty of “excitement” ahead, as our spell proof failed to convey earlier this morning. The next big development, by far, will be Mueller’s public testimony before Congress later this spring.
LET’S NOT FORGET MUELLER’S MANDATE: He was supposed to investigate Russian interference in the 2016 election, and he found that it was blatant. His probe, like everything in Washington, became a partisan brawl — but no serious person can deny that interference in our elections occurred and is an outrage.
THERE’S STILL A FLICKER OF LIFE for impeachment advocates in the House, who will look at far more than obstruction of justice. But Trump won’t get convicted in the Senate. His bigger vulnerability is that countless allegations — and his furious tweets — will persist ahead of the 2020 election, and that could become a political liability for him.
BUT TRUMP HAS THE BIGGEST MEGAPHONE in Washington, a fanatically loyal base, and remarkably compliant Republicans in Congress. And he can boast about a strong economy. The Mueller report may wound Trump, but it’s not a fatal blow.
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