Forward Guidance: Is There a Play on the Comey Testimony?

by Samuel Taube, Research Correspondent, Investment U

Editor’s Note: Today, Investment U is launching Forward Guidance, a weekly podcast about the news and current events that matter to your portfolio.

This podcast was recorded on Thursday afternoon, immediately after James Comey’s public testimony. The situation may have changed by the time this airs, and we will update the text below accordingly.

On this week’s episode of Forward Guidance, I’m talking with Matthew Carr about the market effects of former FBI Director James Comey’s testimony to Congress about President Trump on Thursday.

While the testimony contained a few notable moments, it didn’t decisively indicate that President Trump had committed a crime. With that in mind, I started the conversation with Matthew by asking him about the chances of a second “Trump rally” in equities.

Matthew agrees that the hearing didn’t deliver any big, impeachable bombshells. But also, he doesn’t think that a Trump-fueled market rally is likely.

In his view, the original Trump rally was fueled by optimism around Trump’s tax agenda... and that rally is over at this point. Matthew points out that financial stocks and the U.S. dollar cooled off this spring, as investors lost confidence in the administration’s ability to make progress on policy matters.

The market is still hitting all-time highs, but Matthew believes that has more to do with fundamentals than with Comey and Trump. However, he does see one potential play on the latest events from D.C. - media stocks.

For a nonelection year, 2017 has seen an unprecedented level of activity from super PACs, special interest groups and partisan media companies. Matthew feels that all of this political conflict could translate into higher revenues for cable networks and other ad sellers.

At the end of our conversation, he made an important point about how political scandals affect the market - in the long term, they don’t. Matthew emphasized that the market doesn’t care whether or not Trump is impeached. It didn’t really care when Nixon was ousted or when Clinton successfully defended himself from conviction.

Rather, the market cares about certainty. No matter which way the Trump-Russia investigation goes, investors will probably be happy when it ends.

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