Mueller Report: Will It Light the Fuse for Heightened Volatility?

Over the short-run, we could see a volatile two-sided response to the initial release of the report. After that it’s all up to the Democrats and whether they have enough evidence to impeach Trump or if they decide to put their efforts into beating him in the 2020 election.
James Hyerczyk
President Trump

It’s finally here. The report that could upset the U.S. financial markets this week is finally finished. Will it be bigger than Brexit? Have more impact than a U.S. Federal Reserve policy announcement? Shake up the markets like a flash crash? Or will it be a dud like opening up Al Capone’s safe?

Well it’s certainly news, but is it the news that investors can grasp instantly and react to? Is it something they have to think about? Will investors be able to assess its immediate impact or is it just another event like the U.S.-China trade talks that just keep going, and going and going like the Energizer Bunny?

What are we talking about? The much anticipated Mueller report, or the nearly two-year investigation into Russian meddling in the 2016 presidential election, and whether the then-presidential candidate Donald Trump’s campaign colluded with the Kremlin.

What do investors know so far about the investigation? No much since Mueller has remained tight-lipped on his findings, which can be considered a major accomplishment in itself since politicians can be loose-lipped. Additionally, given today’s social media craze, he should be given credit for completing a thorough investigation despite a plethora of conjecture, speculation and massive amounts of distracting noise.

What We Know So Far?

Ahead of the release of the report, nearly 200 charges against 34 people and three Russian companies have been filed since the beginning of the investigation, including the six former Trump advisors who have been indicted, and twenty-six Russian nationals. Furthermore, seven have submitted guilty pleas, and five have been sentenced for their crimes.

Trump:  Deny, Deny, Deny

Trump has denied any wrongdoing related to the Mueller probe, adopting “no collusion” as a mantra over the course of the investigation. Additionally, Trump and his allies have repeatedly attacked the investigation, calling it a “witch hunt”.

Fodder for Impeachment

Some Democrats are licking their chops hoping the report gives them enough fodder to oust the President. However, their Fearless Leader House Speaker Nancy Pelosi has said Trump is “not worth” impeachment.

How It Will Affect the Markets

On Friday, Special Counsel Robert Mueller completed his Russia investigation and delivered his highly anticipated report to Attorney General William Barr. He is expected to release it to the press on Sunday. Look for a media feeding fest after that.

As far as the markets are concerned, if there is anything in the report that helps build a case for impeachment then this will be the hot topic for a few weeks. If the Democrats decide to pursue impeachment then look for a sell-off in the stock market. The dollar is also likely to weaken and interest rates will likely plunge while gold rises. Safe-haven buyers will also likely to flock to the Japanese Yen and Swiss Franc.

Impeachment will not be good for the United States because it will divide the country and distract President Trump and the Republicans. This could bring a halt to the U.S.-China trade negotiations, which would not be good for investors. Additionally, it could even force the President into making a bad deal.

The good thing for investors is that talk of impeachment is fading. Both Democratic and Republican voters think it would be a bad idea. Additionally, if the report shows Trump committed crimes then he could always be prosecuted after leaving office. Trump’s business could also be indicted. Furthermore, there have been reports that the investigation has revealed some dirt on Hillary Clinton.

Over the short-run, we could see a volatile two-sided response to the initial release of the report. After that it’s all up to the Democrats and whether they have enough evidence to impeach Trump or if they decide to put their efforts into beating him in the 2020 election.

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