Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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Mueller and the market
John J. Hardy
Chief Macro Strategist
Summary: The Mueller report has landed, and its mixture of findings has only emboldened the fierce partisan divide in US politics. While markets remain broadly unfazed, the political battles to come could have meaningful effects on US policy into the 2020 election.
While the Mueller Report on Russian interference in the 2016 US election failed to establish that President Trump’s campaign “coordinated or conspired” with Moscow to sway the 2016 ballot, the multitude of lesser obstructions, infractions, and general murky dealings uncovered in the report mean that Trump’s domestic enemies are emboldened – even as his own base attempts a victory lap. For the moment, markets appear unmoved by the debate, but where the Democrats and the Trump administration take their battle from here could have a lot to say about US policy and even US stability into the 2020 election.
Here's what some key commentators are saying about the release.
Democrats
• One angle: The Mueller report provides plenty of meat on Trump’s obstruction of justice, but doesn’t feel empowered to bring charges against a sitting president due to extant Justice Department guidelines.
• “Some analysts have cast the Mueller report as essentially an “impeachment referral” (read more at The Atlantic for for a heavily Democrat-leaning perspective on this).
• The Dems' super-progressive wing (read: Alexandria Ocasio-Cortez, Rashida Tlaib) is proceeding at full steam in trying to set formal impeachment proceedings in motion.
• Among prominent Democratic presidential candidates, sitting US Senators Elizabeth Warren and Kamala Harris are explicitly for impeachment, but the fivethirtyeight writer believes that moderates’ 'no impeachment' approach will carry the day.
• The middle road is subpoenaing for an unredacted edition of the Mueller report, in addition to having Mueller himself testify.
Republicans
• On the Republican side, we see Trump loyalists eager to turn the tables and explore the origins of the Russia probe, i.e. “investigating the investigators”. Some would link GOP efforts to pursue this route to Democratic efforts to impeach.
• “If Republicans want to investigate the investigators, the Justice Department and the GOP-controlled Senate Judiciary Committee are the most logical places for an extended inquiry into the origins of the Trump-Russia investigation. And that means Barr and Senate Judiciary Committee Chairman Lindsey Graham are, in some ways, the deciders here.”
The New York Times' Gail Collins offers the basic argument for the "don’t seek impeachment approach:
• “I am actually taking a conservative approach, which is that we can wait to reject this appalling worst-president-ever in the next election."
• "Impeachment would drive the whole country even further apart. The Republicans in the Senate would never go for it anyway.”
• “[The] report lays to rest the central and most damning charge against him, conspiracy (or collusion)."
The next steps for the Mueller report:
• Democrats have subpoenaed the full, unredacted Mueller report and are awaiting the outcome.
• Ex-White House counsel Don McGahn, a prominent testifier in the Report who refused Trump’s effort to consider firing Mueller, has been subpoenaed to appear to testify before a House Judiciary Committee on May 21.
While the Mueller Report is the flagship of the Democrats' anti-Trump fleet, there remain several other angles for Democratic attacks on the Trump administration that we could see play out in the medium term. These include:
White House security clearances (especially for Jared Kushner)
The White House told former WH personnel security director Carl Kline to not show up for questioning before the House Oversight Committee. Kline’s lawyer said his client will listen to White House instructions.
Past financial history/taxes
• The Trump Organization has filed a lawsuit against House Oversight Committee chairman Elijah Cummings and accounting firm Mazars USA LLP to bloc the chairman’s subpoena of eight years of President Trump’s financial statements, saying it “threatens to expose plaintiffs’ confidential information and lacks a legitimate legislative purpose”.
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