One Thing To Consider

I have given my opinion since the beginning of February that the highest probability is that we are in a consolidation phase of the current bull market.  The biggest risk to that thesis would be an unexpected event washing over the transom.  One possible thing to now watch out for is rising political risk in the United States.  This week the President has induced more chaos into the system by deciding to impose tariffs on steel and aluminum.  In response one of his chief economic advisors, Gary Cohn, has decided to resign.  The Street is not happy about this news today and markets have initially opened lower because Cohn is a Wall Street man, formerly a Goldman Sachs partner.  I will let others discuss the economic issue of tariffs and others can opine on the long term impact of Cohn's departure.  While I think these events could ruffle feathers shorter term, I believe they are drawing attention away from the political risk that may become more apparent as we head further into the year.

The President is no stranger to controversy and seems to thrive in a chaotic atmosphere that might unnerve others.  Whether fair or not the cumulative mounting evidence of discord in the current Administration has the potential to impact markets, particularly if the Administration starts to promote policies that are perceived to be unfriendly to stocks.  

Away from this it is possible some of the President's personal problems as well as the ongoing investigations into possible ties to Russia could mount a political toll that starts to impact either the economy or the markets.

Finally I think so far it is underappreciated the higher probability that the Democrats could regain control of both the House of Representatives and the Senate this year.  In that case, at best, we could find many of the Administrations polices either blunted or overturned.  It is not impossible to imagine a Democratically controlled legislative branch contemplating impeachment proceedings against the President.

None of this is meant to be political commentary.  I'm writing this to point out that rising political risk is perhaps not yet quite as appreciated in the markets or by investors.  I think it is something that bears watching as the year  advances.  

Back Friday.