• 2 hours Widespread Power Outages Hit New York City
  • 5 hours Equifax To Pay $700 Million To Settle Data Breach Case
  • 7 hours Netflix Struggles To Rebound After Subscriber Hit
  • 1 day $15,000 For Your Crypto’s Ticket To Visibility
  • 2 days The Next Fashion Frontier
  • 3 days What Is Africa’s Role In The New Silk Road?
  • 4 days Trump Was Right About The Dollar
  • 4 days Is Silver Gearing Up For A Rally?
  • 4 days World’s Largest Hedge Fund Turns Bullish On Gold
  • 4 days It’s Time To Spend More On Clean Energy R&D
  • 5 days Contrarian Investors Are Beating The Stock Market
  • 5 days Bulgaria’s Revenue Agency Falls Victim To Biggest Cyber Heist In History
  • 5 days Amazon Faces European Union Anti-Trust Probe
  • 5 days Commodities Are Having A Stellar Year
  • 6 days Bezos’ Next Big Project Could Be Worth $100 Billion Per Year
  • 6 days 3,600 Years Later, Climate Change Turns Mammoths Into $40M Market
  • 6 days Tesla, Apple Claim China Is Stealing Intellectual Property
  • 6 days EV Giants Duke It Out For Battery Dominance
  • 7 days Tech Billionaire Takes Aim At Google
  • 7 days Chinese Police Bust Largest Ever Illicit Crypto Mining Operation
The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Market Sentiment At Its Lowest In 10 Months

Market Sentiment At Its Lowest In 10 Months

Stocks sold off last week…

  1. Home
  2. Markets
  3. Other

U.S. Political Uncertainty Keeps Stock Markets On Edge

White House

As domestic political stability takes a nose-dive over unprecedented White House exits, the Russia probe intensifies, and foreign relations threaten to implode, the U.S. is experiencing its highest level of risk since Watergate.

While the markets haven’t flinched at the prospect of a nuclear North Korea or Middle East war rumblings, they are flinching at a U.S. domestic political economy that one analyst has likened to an emerging market.

And expectations of a Federal Reserve rate hike on Wednesday are adding more nervousness to the already intense anxiety.

And the risks continue to line up around the corner.

In what can only be described as a purge, the White House has dismissed five high-level people in just two weeks, including Secretary of State Rex Tillerson, National Economic Council Director Gary Cohn, Communications Director Hope Hicks, personal aide John McEntee and communications aide Josh Raffel. And now, rumors are that national security adviser General H.R. McMaster may be the next to be forced out.

No one’s sure how long Gary Cohn’s replacement, Larry Kudlow, will last, either: He’s a free-trade believer and may not follow the protectionist line expected of him, according to former diplomat Edward Harrison

On the foreign policy scene, the Iran nuclear deal is up in the air and talks are upcoming between Trump and North Korea--and there is every reason to feel anxious. Meanwhile, the UK has raised the stakes with Russia after the poisoning of a former Russian spy. The White House was slow to join the UK on the offensive here, and Putin—fresh from a Sunday re-election victory—will maintain the advantage.

The elephant in the room is the Russia probe, led by special counsel Robert Mueller. By now, it’s gone beyond the level of threats and is hijacking the bulk of mainstream media headlines, as the president becomes increasingly aggressive.

Now, hefty steel and aluminum tariffs have scores of American industries up in arms, and many worried that even if it doesn’t result in a full-blow trade war, the protectionist policy will have a detrimental effect on the U.S. economy.

The “Mueller Risk Index”, developed by quantitative research firm GeoQuant, co-founded by Mark Rosenberg, focuses on the Russia probe of special counsel Mueller and the prospects of impeachment as the biggest political risk.

The index tracks the perception of political risk, much like the VIX tracks volatility.  Related: How Low Can Bitcoin Go?

The index launched only on 2 March, but has been rising steadily, with Rosenberg saying that the “most appropriate comparison would be Watergate”.

But Rosenberg also sees the high level of risk in this case as a boost for the dollar.

“The stock market loves Trump and the dollar hates him,” Rosenberg says, but as the index risk level rises and the Trump administration becomes more unstable we are likely to see a noticeable downturn in the stock market, while the dollar will benefit.

Tracking the dollar with the Mueller index looks like this:

(Click to enlarge)

And here’s what the S&P 500 looks like tracked along with the Mueller risk:

(Click to enlarge)

The Mueller Risk Index doesn’t even account for the White House purge or the looming geopolitical uncertainty—nor does it account for anxiety over interest rate hikes by the Fed, which is heading into a two-day meeting this week that will very like result in higher interest rates.

By Fred Dunkley for Safehaven.com

More Top Reads From Safehaven.com:

Back to homepage

Leave a comment

Leave a comment