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Double, double, toil and trouble

| Posted by: Paul Donovan | Tags: Paul Donovan

  • US President Trump faces either double trouble (Cohen and Manafort) or a witch hunt, depending on your perspective. Does this matter for markets? It might matter if the president's political capital with Congress was undermined, affecting policy. However, the president does not have that much political capital with Congress, and is not asking Congress to pass laws they do not want to pass.
  • It might matter if markets think the politics will change the midterm election results (or the risks around those results), and thus policy. However, Republicans may successfully try to separate themselves from Trump. Trump supporters may be motivated to turn out and vote. This impact on midterms is not certain.
  • It might matter if trade policy is used to distract attention from the domestic politics. The US president has considerable authority over trade, and taxing US consumers via trade tariffs can be made to serve the "Make America Great Again" slogan. Overall, the muted market reaction seems appropriate.
  • It was also announced that the interminably tedious process of cutting the EU off from the UK will now be interminable, tedious and continuous. Continuous negotiation means continuous statements, continuous posturing, continuous leaks, and continuous noise for investors.