No matter what is going on in the world of politics, the business of investing is to make money. Smart investors are apolitical. Their only concerns with politics have to do with the effects of laws and regulations on investing profits. We just wrote about whether or not the mid-term elections could cause you to lose money. But, now the question comes into closer focus with the legal troubles of those close to Donald Trump. What is going on and should you be concerned? In short, will Trump’s problems cause you to lose money?
Fraud Convictions for Manafort and Guilty Plea by Cohen
Just yesterday Trump’s former campaign manager was convicted of several counts of fraud and his former lawyer pled guilty to other crimes, while also implicating the President of the United States in a cover-up. The New York Times writes about all the President’s crooks.
On Tuesday afternoon, the American public was treated to an astonishing split-screen moment involving two of those people, as Mr. Trump’s former campaign chief was convicted by a federal jury in Virginia of multiple crimes carrying years in prison at the same time that his longtime personal lawyer pleaded guilty in federal court in New York to his own lengthy trail of criminality, and confessed that he had committed at least some of the crimes “at the direction of” Mr. Trump himself.
Let that sink in: Mr. Trump’s own lawyer has now accused him, under oath, of committing a felony.
Only a complete fantasist – that is, only President Trump and his cult – could continue to claim that this investigation of foreign subversion of an American election, which has already yielded dozens of other indictments and several guilty pleas, is a “hoax” or “scam” or “rigged witch hunt.”
To say the least, this could be bad news for Trump. But, back to the point, will Trump’s problems cause you to lose money?
For Now, Wall Street Does Not Care!
CNN Money reiterates what we said in our article about the mid-term elections. Smart investors are only interested in politics to the degree that governmental changes directly affect business. CNN writes about why Wall Street is unfazed by the Trump-related turmoil.
“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.
Is there any scenario in which an investor should be worried? We noted in our article about the mid-term elections that uncertainty tends to drive stock prices down prior to elections, but markets tend to recover nicely once the political dust has settled. Is there any reason to be more concerned this time around?
The “I” Word and Increased Uncertainty
In our opinion, the main issues facing investors are a possible full-fledged trade war and a nine year bull market that will eventually correct strongly. Investors deal with these issues every day. Trump’s problems enter the mix because of his combative nature. Rather than just letting things run their course, the current President may well decide to pardon Manafort and attempt stop the Mueller investigation into Russian meddling in the US electoral process. If there is a Democratic majority in the House of Representatives next year, and especially if there is a Democratic majority in the US Senate, the specter arises of impeachment proceedings.
So, would impeachment of a sitting US President hurt your investments? Remember that Bill Clinton was impeached by a Republican House of Representatives in 1998 and in 1999 the Democratic controlled US Senate acquitted him of the charges. During the Clinton years, the stock market had one of its best 8 year runs ever!
If things go really badly for the sitting US President, the issue for investors will be uncertainty and not the specifics of what is going on in the world of politics and legal proceedings. Will Trump’s problems cause you to lose money? The answer is that if you lose money in your investments, it will probably not be the President’s fault!