Investors have largely ignored the political drama that has accompanied the first two years of the Trump administration, but equity strategists and analysts say markets will soon have to confront its ramifications, as U.S. Attorney General William Barr sent a letter summarizing the findings of special counsel Robert Mueller’s investigation to Congress on Sunday.
According to the summary, the Mueller probe did not find evidence that the Trump campaign “conspired or coordinated” with Russia to influence the 2016 presidential election. Mueller also investigated whether Trump obstructed justice but did not come to a definitive answer.
Read: Here’s William Barr’s summary letter of Robert Mueller’s investigation
While analysts last week predicted major stock volatility if the report had incriminated Trump in a direct manner, Sunday’s summary appears less likely to roil the markets.
There was “more downside risk than upside” from the report’s release, Stephen Pavlick, Washington policy analyst at Renaissance Macro Research, told MarketWatch in an interview last week.
That is because “most people have priced in that there isn’t a lot of ‘there’ there,” he added, arguing that if there really were damning information, such as proof that Donald Trump coordinated with the Russian government’s effort to boost his election chances, that it likely would have come out already, given the media’s intense focus on the issue.
See: Opinion: The Mueller report shows that Trump has outmaneuvered Washington, again
The fears of impeachment, too, seem to be receding, as House Speaker Nancy Pelosi said earlier this month that, while she doesn’t think Trump is fit for office, she opposes impeachment, “unless there’s something so compelling and overwhelming and bipartisan” as to make impeachment imperative.
The lasting effect of the report, therefore, may not materialize until closer to the 2020 elections, when the Democratic Party is seen as having a good chance of taking control of the Senate and retaining its House majority, as well as potentially winning the White House, especially if revelations from the Mueller report reduce the chances of the president getting re-elected, he said.
“Unified Democratic government could spook markets,” said Brad McMillan, chief investment officer at Commonwealth Financial Network, but, he conceded, it is too early to tell what the Democrats’ policy agenda would look like.
There is an already crowded field competing for the Democratic Party’s nomination for president, and the process has been notable for the number of bold economic policies proposed by candidates including Elizabeth Warren and Bernie Sanders, including new financial transaction or wealth taxes, that observers say could hurt stock valuations.
Whether this willingness to propose such left-leaning policies captures the imagination of Democratic Party primary voters remains to be seen. “There are a lot of possible outcomes,” McMillan said . “If the nominee is Joe Biden, that’s one thing, [and] if it is Elizabeth Warren, it is totally different.”
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