Political turmoil will be around throughout Trump’s tenure
|How high are the chances that we get another government shutdown next Friday?
At this juncture, pretty low. It seems like Trump is showing his hand a little early by not fighting to have funding for his pointless wall be in this budget. He’s pushing that negotiation until later this year. As he is learning, anything controversial usually gets pushed off and the status quo stays put.
What kind of effect would such an event have for the USD? And for the stock markets?
The USD would pull back if they were to shut the government down. The markets would drop all over the world. No market would be spared. US GDP for the 2Q would take a hit based on the amount of time the shutdown lasts. We would see a move into safe havens such as Gold, Treasurys and the Japanese Yen. On a side note, federal employees may see a little baby boom as 800K workers don’t report to work.
The can might be kicked down the road until the end of the fiscal year (Sept 30th): would that be a relief for the markets?
The markets are already pricing that in so this would not be a relief to the markets. Like everything else in DC, they wait until the very last minute. And if they go over, they pass a resolution adding a few more minutes. Then they kick the can down the road.
How much of Trump’s credibility on the promises made during the campaign is at play on this debt ceiling front?
He keeps flipping on so many of his campaign promises, it’s pretty tough to imagine his credibility being affected if the government were to shut down. Congress has a lower approval rating than the plague. Teflon Don’s credibility will not be touched with this.
Republicans have a majority in both Congress and Senate but passing important bills still is a struggle. What does that mean for the markets? Will there be constant political turmoil in the upcoming years?
The markets will likely have to wait longer than anticipated for the tax reform that has driven stocks to new all-time highs. As we have seen with Obama’s tenure, Congress is extremely polarized. Political turmoil will be around throughout Trump’s tenure. The question is how much infighting we will see within the Republican party. If they can’t pass any substantial legislation (a duck stamp bill is considered legislation, hence substantial), we may as well call the US a Banana Republic.
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