Are Markets Vulnerable To White House Headlines?

                                                             (Video length 00:05:44)

On the latest edition of Market Week in Review, Senior Investment Strategist Paul Eitelman and Rob Cittadini, director, Americas institutional, discussed the potential market impacts of recent U.S. political news, the likelihood of a September interest rate increase by the U.S. Federal Reserve, and the current U.S. bull market.

Trump and markets: Could the latest news impact investors?

Political news surrounding the White House dominated headlines in the U.S. the week of Aug. 20, Eitelman said, but the impact of the recent developments on financial markets is likely to be negligible. Why? “What investors appear to really care about most are the newly-enacted tax cuts for U.S. corporations and households, recent regulatory reforms that are having the effect of streamlining business activity, and the budget agreement passed by Congress in March, which has provided a boost for discretionary fiscal spending,” he explained. All these pro-growth initiatives, said Eitelman, have been well-received by markets, as they’ve generally led to increased earnings growth and real gross domestic product (GDP) growth.

“It’s hard to see how any of the recent legal or political developments involving the Trump administration could derail financial markets—especially given that all of these recent measures have already been signed into law,” Eitelman said, adding that he and the team of strategists at Russell Investments are not expecting enough of a change in the makeup of the U.S. Congress after November’s mid-term elections for any of these laws to be reversed.

In Eitelman’s view, the higher risk to markets in the short-term is the potential threat of a trade war between the U.S. and China. Low-level discussions between the two nations the week of Aug. 20 didn’t appear to progress favorably, he said. “This means, in my opinion, that there’s certainly a risk, as we move toward early September, that the proposed threat of tariffs by the U.S. on an additional $200 billion worth of Chinese goods could potentially be implemented,” he concluded.