The proceedings in the House against Donald Trump seems to get a lot of attention.
One area that seems unmoved by it is the market. Wall Street really could give a hoot about what happens to Donald Trump. This is evident from the dismissal of anything related to the proceedings.
It could be claimed that the market is simply not reacting to speculation and will wait until something concrete comes out. My retort to that is when has the market ever done that. It certainly does not have that outlook when it comes to the trade situation. Each piece of news, pro or con, seems to affect the market immediately. Of course, it needs to reverse course once the speculation turns out unfounded.
My view is the market truly does not care about the potential of a Trump impeachment because it changes nothing. In the end, unless the Senate boots him, which is unlikely, this is all just for show, at least from the market's perspective. The pro-business policies of Trump will continue regardless of what happens. Even if he is removed from office, Pence will take over, also unlikely to change anything.
At the same time, Wall Street has an even bigger Santa Clause than Trump and his pro-business stance. The Fed is the gift that just keeps on giving. Here again, some might assert that Trump's badgering of the Fed caused them to give in but I find that unlikely. The Fed works hard to maintain its independence and, ironically, has been rather consistent with their stance.
The truth is that, despite the President's rhetoric, all is not sunshine and roses with the global economy. There are certain indicators that are telling the Fed that trouble lies ahead. For this reason, the Fed is trying to be proactive in their approach. Will it work? That is the subject of great debates and, honestly, we will have to wait for it all to unfold before knowing.
What we do know is the market loves cheap money that is given out in boatloads. As long as interest rates are low, the market is on Cloud 9. Couple that with an expansion of the balance sheet (but do not call it easing) and the market sees only green. Sure we have a few blips here and there like earlier in the week yet the overall trend is clear.
The President likes to think he matters in this equation. Sadly for him, the reality is that the market is saying something else. Whether he stays or goes, it is of little consequence. For the next year, the policies are in place with or without him.
A change in 2020 elections is the next period of uncertainty the market has to look forward to. That said, depending upon how the campaign season goes, the outcome of both the Presidential and Congressional races might be known ahead of time. A landslide gives the market time to prepare.
While many do not buy into the financial engineering that is taking place, it is hard, for the moment, to argue with the effectiveness of it. Companies earnings are looking better due to massive stock buybacks. It might come back to haunt these companies but that time is not upon us. As long as the market is going strong, many believe all is well.
Trump, if he can remain in office, will try to ride this mindset to another term. Here again, we do not see something of his doing. Since the bust of the dotcom bubble, we have been conditioned to believe the market is the economy. Bush 2, Obama, and numerous Fed people have tried to sell this notion. After a couple decades, it seems a percentage of the people believe this to be true. Trump is doing his part to keep up this illusion. Sadly, it is an effective approach.
I think it is safe to say, at this point, Trump or not Trump, the market is going to keep marching on. It truly seemed unfazed by the proceedings surrounding his presidency.
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