US: Political uncertainty may simmer - AmpGFX

Analysts at Amplifying Global FX Capital explain that events regarding Trump, Russia, security leaks, firing the FBI Director, inferences of impeding investigations have been all now blown out of proportion and market conditions will settle back down but it will not just go away as the investigations into the President and his team have intensified.

Key Quotes

“The DoJ has appointed former FBI Director Robert Mueller as Special Council to oversee the investigation into President Trump’s campaign and Russian officials.  The decision to appoint a Special Council helps the crisis from spinning out of control, creating a more independent and dedicated procedure to find out if there was collusion.  But at the same time, to the extent that there was collusion, it is now more likely to come to light in a way that cannot easily be dismissed as politically motivated.”

“The curious case of why Trump stood behind the former National Security Advisor Michael Flynn for so long after he was found to have been untruthful over his dealings with the Russian Ambassador now looks more sinister in light of the Comey memo that suggests President Trump attempted to dissuade Former FBI Director from investigating Flynn.  This issue will not go away with the House of Representatives Committee on Oversight and Government Reform asking the Acting Director of the FBI McCabe to hand over all memoranda, notes, summaries and recordings referring or relating to any communications between Comey and the President before 24 May.”

“Perhaps we have reached a peak in uncertainty.  But uncertainty will continue while these investigations unfold.  Imagine the media glare when Comey faces hearings in Congress (Oliver North anyone?).”

“It remains to be seen if Trump can avoid inflaming the situation with outrageous claims and misdirections on Twitter.  He has been more controlled in recent days (notwithstanding his claims that the Russia probe is a witch hunt).”

“The controversy has significantly reduced the prospect of Trump getting his policy proposals through Congress, including tax reform.  Republicans may continue to push on with developing their own versions of tax reform, but it will be harder to find agreement without strong leadership from the administration.”

“The administration still has capable heads of key departments (Treasury and Commerce) that have been able to stay out of controversy and can help drive policy negotiations.  Vice President Pence is offering a contrasting stable image to the President.  The administration could contribute to forward policy momentum, in spite of a controversial president.”

“There is an argument that if Trump were to be impeached, it would remove the swirling controversy from the administration and leave “the adults” in place to get the job done.  However, the process of impeachment would be prolonged and even more distracting, and would probably unleash even more erratic behavior from Trump, and possible social unrest considering the capacity for Trump to stir up his loyal voter base.”

“The more optimistic outcome is that Trump manages to buckle down, the controversies, that will undoubtedly simmer, will do so without boiling over, the adults in the administration can show leadership and consistency, and Republicans in Congress use the controversy as motivation to come together on any sort of tax reform.  Considering that the market is now wondering if any tax reform will happen, this would be a positive outcome.  However, this is indeed the optimistic outcome, and the market must accept the high probability that political uncertainty and discord weaken economic confidence.”

“This is even more apparent in light of recent events.”