On Saturday, President Trump accused former President Barack Obama of ordering the "wiretapping" of his private phone during the 2016 presidential election. "Terrible! Just found out that Obama had my ‘wires tapped' in Trump Tower just before the victory. Nothing found. This is McCarthyism!" said Trump, in a series of tweets. Trump implied that Obama personally ordered such a move with the intention of undermining Trump's campaign. While the U.S. president does not have such an authority, the Justice Department could ask a federal judge for a warrant to grant such an authority.
Washington was abuzz on Sunday, as former Obama officials struck back with blanket denials of such actions. Former director of National Intelligence, James Clapper, appearing on NBC's Meet the Press commented, "For the part of the national security apparatus that I oversaw as DNI, there was no such wiretap activity mounted against the president-elect at the time, or as a candidate or against his campaign." So if the head of intelligence under President Obama denies any wiretapping while the one person with the most access to U.S. intelligence efforts, namely President Trump, believes otherwise, who is telling the truth?Financial markets fear, above all else, uncertainty. The current uncertainty that has plagued the Trump White House will be devastating to financial markets, but with a Republican-controlled Congress, markets may shrug off any potential uncertainty. Let us start at the worst case scenario and work backwards.
The worst case scenario begins with the resignation of Attorney General Jeff Sessions over his blatant lie, under oath, to the U.S. Senate in describing his role as a "surrogate" to the Trump campaign and his denial of ever meeting any Russian officials in the same breath. Sessions met with the Russian ambassador apparently, twice, before he was confirmed as attorney general. From there started investigations into further falsehoods by other members of the Trump administration that ultimately led to the uncovering of a "high-crime" or "misdemeanor" by President Trump himself and his impeachment.Following a vote of impeachment by the Republican House of Representatives, the Republican-controlled Senate would need to vote by at least a two-thirds majority to convict and remove President Trump. As unlikely as getting 19 Republicans to join 46 Democrats and two independents in convicting Trump might sound, it might not be all that bad for the party. An establishment Republican's Republican in Vice-President Mike Pence would assume the Presidency for three years, assuming the impeachment takes place in the first year of the Trump presidency. A Gerald Ford-type pardon for Trump and his officials would wipe away any festering investigations and the Republican-controlled Congress would be able to push through its agenda.
In other words, even in the worst case scenario, the Republican's still control the two most powerful branches of government and will be in position to name at least one Supreme Court justice at the minimum and potentially three more as justices Ginsburg, Breyer, and Kennedy, all on the "liberal" leaning side of the court pass the age of average U.S. life expectancy. This would mean a "market-friendly" Supreme Court for at least the next generation, if the Republican party can still be called "market-friendly." So a Trump impeachment is ultimately not bad for the Republican's and may even be better than a Trump presidency marred by turmoil, especially going into the 2018 mid-term elections.
Therefore, it is perhaps because of this, that Federal Reserve Chair Janet Yellen did an about face in nearly guaranteeing a Federal Funds Rate hike at the March Fed meeting. If politics does not matter, only fundamentals do. While Friday's job report will be important in cementing the rate hike next week, Yellen's unconventional flat-out assurance of one was coupled with pledges for more to come: "Given how close we are to meeting our statutory goals, and in the absence of new developments that might materially worsen the economic outlook, the process of scaling back accommodation likely will not be as slow as it was in 2015 and 2016," said the Fed Chair. These words are particularly surprising, as last week's market predictions for a rate hike were near 20 percent and are now practically 100 percent following her comments. While catching market's off-guard is not par for the course for the Federal Reserve, these are peculiar times we live in and there must be some reason for these surprising remarks. We will have to wait and see what happens.