Double, Double, Toil and Trouble
- What does the "witch hunt" or "independent investigation" of US President Trump's election campaign mean for investors? Details are of limited importance. Processes may matter
- Political noise has little near-term economic impact. People care whether they have a job, and what is happening to prices. Sentiment data may be negatively influenced by the news cycle, but sentiment data is not really part of the real world economy.
- Politics does influence longer-term trends. Investors do factor in longer-term trends to current market prices. Moreover, international investors tend to have less understanding of the nuances of US politics, and may overreact to changing perceptions of political risk.
- This investigation will take time – administration officials testifying, and members of Congress investigating and participating in the media circus. Time is a valuable, finite political commodity. Time spent investigating is time not spent on other projects. Market expectations about policy schedules may need to adjust.
- If government processes are bogged down through lack of time, President Trump may become frustrated with trying to act through Congress. There may be more reliance on government through executive orders (where possible). This increases uncertainty for investors.