When it comes to the stock market, Captain James T. Kirk explains it best:
Put simply, when the going gets tough, you’ve got to take educated risks.
And in the context of two looming events, President Trump’s likely firing of special counsel Robert Mueller and Trump’s almost-certain withdrawal from the Iran nuclear deal in May, we’re about to get a buyer’s market!
The key, of course, will be whether you’re willing to ride the risk wave and move in the opposite direction to the majority of investors who will be irrationally freaked out by these events and thus decide to sell. And I do believe the freakouts will be irrational.
While the short-term political fallout from a Trump decision to fire Mueller will be significant and unnerving, its outcome will quickly become clear. The nation is bound to the rule of law, and that means that if the president persists in preventing a continuation of the relevant investigations, it will lead to his impeachment and Vice President Mike Pence’s accession to power.
Yes, that worse case will be unpleasant for the nation and is clearly not preferable. But ultimately, it will be a buyer’s market. That’s because the markets will realign on the fundamental strengths of the U.S. economy and the federal government’s constitutional stability.
In the worst case, Pence is a stable hand who will restore a degree of predictability to the center of U.S. government power.
Of course, Trump may recognize that his best choice is to ride out the Mueller investigation by waiting for the special counsel to finish his work.
In that case, we’re left with the next, much likelier market adventure.
That being the aftermath of President Trump’s decision to withdraw from the Iran nuclear agreement signed by President Obama’s administration in 2015.
When that action comes in May, energy stocks are likely to rise in anticipation of Iranian antics to shut down oil supplies through the Persian Gulf. However, because Iran largely relies on European, Chinese, and Russian commercial interests, it won’t be too concerned by U.S. withdrawal per se. So, the markets should quickly stabilize.
There is one caveat here. If, under advice from his new national security adviser, John Bolton, Trump decides to sanction European multinational corporations that continue to do business with Iran after the U.S. withdraws, the economic spillover will likely provoke Iranian backlash that could lead to a dramatic increase in regional tensions. If that happens, be prepared for a wilder ride.
