Global financial markets rallied Tuesday as both the Nasdaq and S&P 500 reached record levels amid a backdrop of continued economic uncertainty and potential political upheaval in the world's largest financial market, the United States. The Mueller Report brought a nearly two-year investigation into President Trump to a close; however, it has raised more questions than it has answered. How will investors respond to the ensuing political infighting among members of the U.S. Congress and presidential candidates looking to replace President Trump? Will Trump's trade wars be settled before the 2020 election? How will the new policy on Iran oil shape the fate of the Middle East and its trading partners in the near term?
The Mueller Report all but confirms that President Trump and his associates were eager to do whatever they could to win the 2020 election, including collecting potentially damaging information about the Clinton campaign, but it stops short of recommending prosecution for the Trump team. The saving grace for Trump and his associates appears to be, according to Mueller, their absolute ignorance of the law, which means they didn't know what they were doing was illegal, making it difficult to get a conspiracy conviction to stick. Despite these facts, members of the House of Representatives, the lone body that can start impeachment proceedings against President Trump have begun discussing moving ahead with articles of impeachment.
Among Democrats, there is little appetite among the majority to impeach Trump, as they all know there is zero chance of convicting Trump. A two-thirds majority of the Senate is necessary for a conviction, and as it stands the Republicans have the majority. This means that even if all Democrats voted for conviction, they couldn't even get a majority of Senators to convict, let alone two-thirds, without major support from Trump's party. Trump's support appears to be strong among Republicans and thus the odds that senators and members of the House would risk angering the president in an election year are slim to none. In other words, there will be no impeachment, and even if there were, it would be a godsend for Trump. The longer the discussions around impeachment drag on the more Trump can use it to play the martyr and suggest partisan politics are to blame.
For those that suggested Trump's use of trade wars, most notably with China, were to deflect from the debate around his potential collusion with the Russians, we are now beyond the latter and thus the former should also cease. Will Trump's trade wars now come to a conclusion? I think they will, as Trump needs a strong economy going into the 2020 elections. This means settling differences with China, most importantly. Trump may choose to ignite new trade wars for headline affects and that includes tightening sanctions on countries such as Venezuela, Cuba and Iran. Last week the Trump administration announced it would no longer offer waivers for countries buying Iranian oil. The stated goal of the Trump team is that Iran exports zero barrels of oil effective immediately. This would cripple an already fragile Iranian economy and would surely cause widespread humanitarian suffering for a country so dependent on this revenue. Will exports fall to zero? Of course not, smugglers will always find a way to buy black market oil at cheap prices and the United States will look the other way if it is in its interest to do so.
Turkey will be especially hard hit unless it can come up with some compromise to convince the Trump administration that its economy would suffer unnecessarily because of these sanctions. This gives the U.S. leverage over Turkey in the S-400 debate and Turkey knows it. How this episode will be resolved is anyone's guess, but the reality is higher oil prices the world-over will hurt the poor in all countries, including the United States. Trump argued for regime change in Venezuela and to look the other way in the Khashoggi murder case in return for lower prices at the pump for American consumers. Will he do the same in the case of Iran before his presidential election? At present, this doesn't seem as likely and energy markets appear to be heading for choppy waters in the near term.
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