When Mueller Finally Moves, Should the Markets Care?
Author: Greg Valliere
February 21, 2019
WASHINGTON WAS BUZZING YESTERDAY with speculation that the long-awaited report from Robert Mueller will be released within the next week — a dramatic development that will shape the next two years in American politics.
MUELLER HAS STATED that he doesn’t believe he has the authority to indict a sitting president. But he can refer to Donald Trump as an unindicted co-conspirator, which seems likely; the evidence of obstruction of justice is simply too overwhelming to ignore.
AFTER A FEW FRENZIED DAYS of debate on CNN and Fox about releasing the entire report, the focus will fall on the House, which most definitely has the authority to indict a sitting president (see: Bill Clinton). This could set in motion impeachment proceedings which could culminate with a Senate trial this summer — and, most likely, Trump’s acquittal.
WE’VE STUCK TO THIS NARRATIVE for many months, but we’re unsure over wild cards: Has Michael Cohen provided a treasure trove of taped conversations with the President that the public eventually will hear? And could a furious president seek to fire Mueller or issue blanket pardons? Either of these developments could lead to a Constitutional crisis.
THE OTHER UNKNOWN IS WHETHER A MESSY TRIAL could affect the financial markets. It’s worth noting that amid all of the tweets and leaks and cacophony, the markets really haven’t been affected by this two-year Russia probe. There’s been virtually zero impact on Wall Street.
BASED ON THAT TREND, Mueller could indict and issue a damning report, and the markets could react modestly — or even yawn, especially if the Mueller report looks like a simple perjury trap (really, just about everyone in Washington could get indicted for perjury). The prevalent view in the markets is that there aren’t 67 votes in the Senate to convict Trump, and we agree.
A SCATHING MUELLER REPORT certainly will ignite the Democrats’ left, which is already ascendant (Bernie Sanders raised an astonishing $5.6 million in campaign contributions in two days this week). So even if Trump avoids Senate conviction, he could be greatly weakened heading into the 2020 campaign; his famously loyal base will stick with him, but that’s only about 35% of the country.
OUR BOTTOM LINE is as follows: the Mueller report will be scathing, but no one punches back and controls the agenda like Trump — and Senate Republicans will be too timid to convict. A trial this summer would be quite a spectacle, however, perhaps injecting some uncertainty into the markets.
BUT INVESTORS REACT to earnings, GDP, interest rates, etc. and we suspect that these variables will continue to dominate — as long as it seems likely that there aren’t 67 votes to convict in the Senate; the Democrats have only 47 seats. Richard Nixon was doomed in 1974 when Senate Republicans broke with him, but as of now — based on what we know — a GOP revolt against Trump doesn’t look likely.
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