Markets Get Trumped
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On Wednesday May 17th/2017 American markets realized their biggest drop since September 2016. A lot of this drop was attributed to Donald Trump and USA political uncertainty.
Take-Away: Markets have been expecting pro-growth political initiatives from the Trump administration. The current political turmoil has casted a shadow of doubt on whether that is possible and investor patience is waning. Expect any large negative political event to have a severe effect on the markets.
The political problems stem from Donald Trump’s firing of FBI Director, James Comey. There are concerns that Trump obstructed justice with the firing, thereby blurring the clear constitutional lines between the judicial and the executive. The executive does have the power to fire FBI Directors and it last happened in 1993. However the main concern, this time, arises from the timing of the firing. Comey was investigating concerns of information sharing on Trump-Flynn-Russian Relations.
Investors are primarily concerned with how the political uncertainty may affect pro-growth initiatives such as tax reform. Markets are currently very correlated together and as a result any negative political news could result in market sell-off. Investors are waiting to see what shakes out from Washington: whether pro-growth or further political turmoil.