Political turmoil swirling around President Trump reached critical mass on Wednesday, triggering a selloff in the US stock market. One concern is that the administration’s pro-growth policy proposals are vulnerable if the White House is forced to address the chaos, much of it self-inflicted, that threatens to overwhelm Washington.
“The market is kneecapping Trump because of his constant crises, that now look potentially terminal,” says Eric Schiffer, chief executive of the Patriarch Organization, a private-equity firm. “The froth came from the belief that tax reform was coming, infrastructure was coming and trade adjustments were coming. With Trump under immense fire, all of those things go into suspended animation.”
The S&P 500 fell 1.8% yesterday (May 17), closing at a four-week low. The slide looks dramatic in the wake of an unusually calm market environment. But let’s keep yesterday’s decline in perspective. Looking at the S&P’s recent history in terms of weekly changes (see chart below) suggests that the latest drop is noise.
The decline could roll on, of course. That’s a distinct possibility, in part because there’s no quick resolution on the horizon for what’s shaping up to be a major political crisis.
“Calls for President Trump to be impeached are growing louder and that has created a long overdue sense of fear in markets,” says Jasper Lawler at London Capital Group.
The latest twist to the Trump saga is the appointment of a special prosecutor – former FBI director Robert Mueller — to investigate any illegal connections between Russia and last year’s election. The outcome may or may not result in criminal charges, but the process isn’t going to be productive for the White House.
As Politico reminds, “Veterans of previous scandals from Whitewater on say that kind of scrutiny can exact a toll even on a well-functioning White House—which Trump’s, consumed as it is by constant infighting and drama, isn’t.”
