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What crisis? Why Wall Street is unfazed by Trump turmoil

Stocks barely buckled after the White House endured one of its darkest days since Watergate.Unlike du...

Posted: Aug 22, 2018 11:36 PM
Updated: Aug 22, 2018 11:36 PM

Stocks barely buckled after the White House endured one of its darkest days since Watergate.

Unlike during previous moments of peril for President Donald Trump, investors were unfazed by the guilty plea from the president's former personal lawyer Michael Cohen and the conviction of former campaign chairman Paul Manafort.

The Dow dipped just slightly and the S&P 500 flirted with an all-time high. Wall Street's reaction -- or lack thereof -- shows how investors have become accustomed to the almost-daily chaos in Washington, at least so long as the turmoil doesn't threaten the strong American economy.

"The market has known there's a political circus in DC for the entire time of the Trump presidency," said Nicholas Colas, co-founder of DataTrek Research.

"Investors don't really care who the president is. They care about earnings and interest rates," said Colas.

Earnings are booming, thanks to an economy that grew at a four-year high of 4.1% last quarter. Unemployment dropped to 3.9% during July. This week's turmoil does little to change that.

Tax cuts already done

One crucial difference between now and previous Trump crises is that Wall Street already got the massive corporate tax cut and deregulation it wanted from Washington.

Recall how in May 2017, long before the tax law was enacted, stocks briefly plummeted after Trump fired FBI director James Comey. But that freakout proved to be a headfake. Stocks quickly rebounded and went on to hit record highs.

Trump's economic agenda has become much less pro-growth in 2018. Talk of tax cuts has been replaced by threats of tariffs.

"The market likes what it already has -- and doesn't like what it's getting," said Art Hogan, chief market strategist at B. Riley FBR.

"The market liked tax reform and deregulation, not protectionism and trade wars," he said.

Consumers not rattled -- yet

Wall Street may be looking past the Trump turmoil because it's very difficult to determine what happens next -- and even harder to explain what the economic consequences are. Legal experts say the Justice Department is unlikely to indict a sitting president, leaving the matter to Congress.

The odds of impeachment may be rising, but conviction in a US Senate likely to be controlled by Republicans looks improbable at this point.

"You can't model out what an impeachment would do to the economy," said Hogan.

The typical linkage between a political event and the stock market is how it impacts the mood of Americans. For now, shoppers don't seem to be rattled. Target just reported its strongest sales growth in 13 years.

"The real spillover would be if any of this affected confidence and spending dried up," said Colas.

Parallels to late 1990s

History suggests Wall Street can overcome political drama -- at least during a healthy economic environment. The S&P 500 soared 27% in 1998 and then 20% in 1999 even as former President Bill Clinton was impeached by Congress.

"The market didn't flinch. There was a strong economy and high unemployment. Today there's a similar environment," said Hogan.

The wild card is how Trump responds to the increasing pressure. Wall Street could respond negatively if Trump's own actions further destabilize the situation.

"It's not a pretty picture here in Washington," Greg Valliere, chief global strategist at Horizon Investments, wrote to clients. "But as long as Trump doesn't go totally off the rails, investors can compartmentalize."

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 144544

Reported Deaths: 3729
CountyCasesDeaths
DeSoto963299
Hinds9584195
Harrison6848109
Jackson6124118
Rankin528598
Lee484295
Madison4633105
Forrest368186
Jones345287
Lauderdale3350143
Lafayette315049
Washington3097107
Lamar281849
Oktibbeha239261
Bolivar239083
Lowndes228863
Neshoba2164115
Panola211749
Marshall208350
Leflore200890
Pontotoc194728
Monroe190277
Sunflower189755
Lincoln186165
Warren172257
Tate164251
Union160925
Pike160458
Copiah158940
Yazoo151239
Scott150229
Itawamba147634
Coahoma147443
Pearl River144467
Simpson144253
Alcorn143925
Prentiss140429
Grenada136945
Adams136548
Leake131843
Holmes124961
George122224
Tippah121530
Covington117636
Winston116624
Wayne115823
Hancock114139
Marion111046
Attala107833
Tishomingo106142
Newton102729
Chickasaw102432
Tallahatchie95527
Clarke88553
Clay87027
Jasper81122
Walthall75028
Stone72414
Montgomery71925
Calhoun71613
Carroll70614
Lawrence70214
Yalobusha69427
Noxubee69217
Smith68816
Perry65225
Tunica59619
Greene58422
Claiborne57416
Jefferson Davis54217
Humphreys52618
Amite51214
Benton48417
Quitman4796
Webster42014
Kemper40917
Wilkinson38622
Jefferson33811
Franklin3235
Choctaw3077
Sharkey30617
Issaquena1114
Unassigned00

Alabama Coronavirus Cases

Cases: 236865

Reported Deaths: 3472
CountyCasesDeaths
Jefferson31043491
Mobile19446360
Tuscaloosa12684150
Madison12528146
Montgomery12122235
Shelby992276
Baldwin837684
Lee759765
Morgan626247
Calhoun6049113
Etowah600564
Marshall596153
Houston510838
DeKalb469635
Cullman421136
Limestone408844
St. Clair403955
Elmore398961
Lauderdale387253
Walker356199
Talladega339044
Jackson302524
Colbert297641
Blount282236
Autauga266139
Franklin246233
Coffee236615
Dale228454
Dallas222331
Russell21923
Chilton218537
Covington215933
Escambia196931
Tallapoosa171790
Chambers171448
Pike156014
Clarke155319
Marion135535
Winston126623
Lawrence123936
Geneva11848
Pickens117618
Marengo117424
Barbour116710
Bibb115717
Butler114341
Randolph100321
Cherokee99624
Hale93231
Washington89918
Clay89623
Fayette86216
Henry8436
Lowndes78929
Monroe77911
Cleburne75614
Macon71720
Crenshaw70330
Bullock69019
Conecuh68214
Perry6726
Lamar6337
Wilcox62818
Sumter56222
Choctaw41813
Greene41317
Coosa3144
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