Investors this week have shrugged off Robert Mueller’s report that found no evidence of collusion between the 2016 Trump campaign and Russia. Wall Street has more pressing concerns, like the impact the president’s trade policies are having on economic growth and his attacks on the Federal Reserve.
The special counsel’s report, however, isn’t a non-event as it underscores the partisan gridlock in Congress that will make it difficult for the White House to advance its economic agenda. Democrats also are ratcheting up their investigations of the Trump administration. Moreover, the president’s legal troubles are far from over, thanks to multiple ongoing federal and state investigations.
To be sure, Trump is advancing some economic policies that could garner bipartisan support — including a $1 trillion dollar infrastructure upgrade — plans to increase defense spending and calls for an effort to reduce the price of prescription drugs. Of course, that’s easier said than done.
Mueller Stocks
As CNBC notes, a variety of infrastructure stocks, health care shares and defense stocks may benefit from the report’s release. Then again, they may not do squat given Washington’s political gridlock that is evident in the reaction to the limited release of Mueller’s findings.
Investors should keep a close eye on a basket of “Mueller Stocks,” including engineering outfit KBR (NYSE:KBR), health insurer Anthem (NYSE:ANTM) and defense contractor Lockheed Martin (NYSE: LMT). These stocks are all up by double-digit percentages so far this year, so there is no sense of urgency to buy them now.
Trade Wars
Meanwhile, Wall Street pundits are hoping that Trump will address lingering concerns about his trade policy and the drag that it’s having on the global economy now that the special counsel is less of a distraction.
Trump has repeatedly vowed to fix what he considers to be broken trade agreements. He also has claimed that winning trade wars is easy. Maybe with all of his “executive time” freed up with the Mueller probe out of the way, the president can devote more effort to resolving trade disputes with China and the European Union. Like I said, easier said than done.
Economic Growth Slowing
The Organization for Economic Cooperation and Development (OECD) recently slashed its forecasts for global economic growth to 3.3% in 2019 and 3.4% in 2020. Growth in Germany, Europe’s largest economy, is expected to be a piddling 0.7% this year. Thanks to Brexit, the U.K.’s GDP, is forecast to eke out a 1.1% 2019 gain. The U.S. appears to be in better shape than the rest of the world though that’s not saying much.
Ever the optimist, President Trump has forecast that the U.S. economy will grow by at least 3% per year during his presidency, which hasn’t happened since the dot-com bubble of the late 1990s. He also has waged war on the Federal Reserve, blaming the central bank for the country’s economic woes and reportedly considered firing Chair Jerome Powell.
Unfortunately, many private economists don’t share Trump’s optimism. The National Association for Business Economists expects growth of 2.4% in 2019 and 2% in 2020.
The lack of optimism extends to the Fed.
Earlier this year, Fed economists forecast that that U.S. GDP would slow to 2.1% in 2019 and shift down to 1.9% a year later. The U.S. economy grew at 2.9% last year, helped by the Trump tax cuts and increased government spending. Whether Trump will prove the naysayers wrong remains to be seen.
