Headline Risk

Headline Risk-is the ability for an event, or  news headline or even the rumor mill to influence the price of a stock, sector, or broader market.  The past several days have seen several examples of headline risk.  The most notable was the news today that the Democratic controlled House of Representatives may go ahead and start an impeachment inquiry over whether or not the President withheld funds for the Ukraine unless they would investigate Joe Biden's son.  Markets began their decline yesterday as this news leaked out, rallied when the President said he'd release the full transcript of the call that he had with the Ukraine's President but never completely recovered all those losses.    More news will likely emerge as the evening progresses on the House's plan and that could potentially roil stocks in the days ahead.  The national press is once again working itself into a fever over the President and in most of their minds he's already guilty.  However.....

Nobody knows exactly what's going on.  Political pundits on both sides are the first to jump and scream about the alleged atrocity the other sides doing.  Whatever the allegations are and no matter whether they come from the right or the left, these are almost always defined in a "death to the Republic" manner.  Trump may definitely be in hot water over his call with the Ukraine, but all those gunning for his head might want to first see what's in the transcript.  In the end the allegations may be as empty as the most recent ones leveled against Supreme Court Justice Kavanaugh seem to have been.  

Traders, particularly those of the algorithmic type get all itchy over headlines.  However, most of us don't adjust our portfolios by the minute so this type of thing is usually best ignored until hard evidence is presented that what today's headlines are suggesting is correct.  Investors who made hasty decisions today on inflammatory news stories may wind up with a cases of sellers remorse in the coming weeks.  Even if these headlines should prove correct, it may pay to first see how market's react.  Any impeachment trial passed on by the House would be held in the Senate. Right now the markets know there's very little chance that even if the House of Representatives would vote to impeach the President that there's a 2/3rds majority in the Senate to uphold impeachment. That of course may change once the facts are known.  Again though we need to see first what these are.

I already think the President is going to have a tough time getting reelected next year so if I were the Democrats I'd hold all this in reserve and go at him if he wins in 2020.  However, there is a sizable group within that party that wants to get rid of Mr. Trump and that passion may prevail in the coming days.  Better though I think to wait until we've seen what's in those transcripts.  Before we decide if this is impactful to markets longer-term.  

Back Friday.