If the noose is tightening around Donald Trump, should investors be worried?
Richard Harris says the recent scandals surrounding the US president have not fazed financial markets, given that the likelihood of Trump being ousted is low
As an investor, the perspective of distance is often a blessing. Being close to a situation increases the noise and heightens the panic that causes investors to behave irrationally. It is quite natural, then, for international markets to comment on US political news as they do on domestic affairs.
Watch: Trump’s ex-lawyer Michael Cohen pleads guilty
Markets rely on fresh news to reprice assets and they saw little new to get excited about in the news. The main indices on Wall Street were a sea of green, albeit by a small amount, and the rest of the world didn’t seem to care either, with Europe and Asia up across the board (save Australia and China, which had separate issues).
The markets are not stressed about the possibilities of legal action reaching the president because Trump is a long way from having his collar felt. Cohen is primarily accused of a number of fraud cases unconnected with his legal practice. Manafort was convicted for actions outside his campaign activities. The only overlap was on one of Cohen’s charges and the court will decide whether the allegations about payments he made could be construed as “campaign contributions”.
Dirty play has long been part of the political process and to be made illegal, rather than a less ethical part of the game, would empty most of Congress. Even if Mueller finds a smoking gun, there will be months of splitting hairs about the definition of “foreign influence”. It all takes time and the record of successful impeachments of US presidents stands at an unimpressive zero, although Nixon resigned before the event.
Watch: Donald Trump claims he misspoke about Russia’s alleged election meddling
Markets have already discounted old or evolutionary news but will especially react to new disruptive information. As much of the legal news is old or at least guessable, markets would require many more data points that are truly surprising to make them tremble. The lessons of history and present form tell us that Trump has a good shot at a second term because politics is a long game and the Democrats have first to win back Congressional seats.
Little change in the news is exactly why markets are not reacting much to Washington. Investors are more worried about what Trump will do in the future than what he may have done in the past.
Richard Harris is a veteran investment manager, banker, writer and broadcaster and financial expert witness. www.portshelter.com