The Independent Market Observer

Politics Again: The Mueller Report and the Markets

Posted by Brad McMillan, CFA®, CFP®

Find me on:

This entry was posted on Apr 18, 2019 12:32:02 PM

and tagged Commentary

Leave a comment

Mueller reportWith the Mueller report scheduled to be released later today (as of this writing), preceded by the press conference with the attorney general this morning, the newspapers are on high alert. This report is being billed as a potential constitutional crisis and, if it doesn’t approach that level (as it almost certainly will not), as the beginning of the next round of political wars. Both sides have already started dialing up the rhetoric, without even really seeing what is in the report itself. So it goes.

The possible outcomes

Let’s take a step back and game out the possible outcomes. At one extreme, the report may completely exonerate the president and his administration. This is the outcome the president has already presented. On the other extreme, the report could present incontrovertible evidence of collusion amounting to treason, whether deliberate or inadvertent. In both cases, the course forward would be quite clear—but we are very unlikely to get anything that clear cut.

Instead, expect shades of gray that both sides will interpret to their own advantage and use to press their respective agendas. In other words, look for a continuation of exactly where we are right now and where we have been for some time. If we get a clear answer, we can move forward, which will mean less uncertainty. If we don’t (and we won’t), we will continue at the present level of uncertainty.

As a citizen, of course, I am paying attention. As an economist and investor? Not so much. When you consider the effect on my areas of focus here, you can see that one outcome—claritywould actually be a positive either way. But the much more likely outcomecontinued political warfareactually doesn’t change anything much. People will not buy less and businesses will not cut their spending or investment because the two parties continue to yell at each other. Similarly, corporate revenues and earnings won’t take a hit because of that discord.

Markets on alert

There is no doubt we might see some short-term reactions here. Indeed, this morning the markets seemed to be cautious, waiting for the news. Once that news comes out, though, I expect the markets to settle down and resume following the economic trends, which are still reasonably positive. We’ve seen this movie before of course, and here we are approaching new highs once more. Economics wins over politics on a regular basis.

The real impact of the report will be if it has enough damaging information to actually affect consumer or business confidence, for example, by being disturbing enough to start disrupting the administration's support in the Republican Party. This shift would take the political wars to a new level and could represent a longer-term market disruption. Even if this happens, however, it would take time to become apparent. This potential damage is something we need to keep an eye on, primarily through the consumer and business confidence numbers, but will likely take weeks or months to show up, if it ever does.

Same story, different iteration

As usual, the message here is pay attention but, as an investor, don’t worry. The story around most of the recent pullbacks has been about political headlines—the government shutdown, Brexit, and so forth—rattling the markets for a bit and then passing. The Mueller report is very likely just the latest iteration. Keep calm and carry on.

Subscribe via Email

New call-to-action
Crash-Test Investing

Hot Topics

New Call-to-action



see all



The information on this website is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.

The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. All indices are unmanaged and investors cannot invest directly in an index.

The MSCI EAFE (Europe, Australia, Far East) Index is a free float‐adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Index consists of 21 developed market country indices.

One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent.

The VIX (CBOE Volatility Index) measures the market’s expectation of 30-day volatility across a wide range of S&P 500 options.

The forward price-to-earnings (P/E) ratio divides the current share price of the index by its estimated future earnings.

Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided on these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption by Commonwealth of any kind. You should consult with a financial advisor regarding your specific situation.


Please review our Terms of Use

Commonwealth Financial Network®