Yesterday’s release of the minutes of last month’s meeting of the FOMC indicated the near-certainty of a 0.25% rate hike next month but seemed to hit a minor note of caution over a further anticipated hike in December. The market’s implied consensus odds now stand at a 96% chance of a September hike and a 60% chance of a December hike. Overall, there was no real change from what was expected. A note of concern over trade disputes with major trading partners was sounded, with the Committee pointing out that such disputes might cause an economic deterioration.
The U.S. Dollar rose a little following the release, but the rise was far from being any kind of notable movement. The U.S. stock market still seems firm. In fact, the S&P 500 Index is only a few points off its highest ever all-time closing price, which would be a major technical development, and could possibly signify the start of a more strongly bullish bull market. This is another reason why the timing of President Trump’s attempt to talk down the U.S. Dollar a few days ago was well-chosen and crucial.
Talking of the U.S. President, he is back in the headlines this week as one of his former associates was convicted of financial crimes and his former personal lawyer struck a plea deal with prosecutors. Pollsters believe that the Democratic Party has an approximately 75% chance of recapturing the House of Representatives in elections this November. This would make it quite possible for the House of Representatives to pass a motion of impeachment against President Trump, which only requires a simple majority. However, the motion would then have to go to the Senate, which will not only almost certainly have a Republican majority after November, but which may only impeach by a two-thirds majority vote. Unless a very dramatic scandal emerges concerning the President in the meantime, an attempt to impeach him just after November is doomed to fail. Politically, though, it will be an inevitable move for the Democratic Party, which has a scorched earth fight against the President at the center of its strategy.
How would an impeachment process in Congress affect the market? Probably not at all, unless it looked as if it had a serious chance of effecting the President’s removal from office. When President Nixon was being forced out of office, the market certainly suffered, and began to recover the very day he resigned. Yet there is still no proof of any wrongdoing by the President remotely comparable to Nixon’s authorization of a burglary against his political opponent.