As the stock market takes a brief break from the torrid pace of its recent record run, one has to wonder just how complacent the market has gotten, not about economic risk, or policy risk, but about pure political risk inherent in the Trump presidency.
President Trump's 77-minute press conference on Thursday, dubbed "Festivus" by one political reporter, was largely substance-free combination of assaults on the press and the intelligence community, and included the sort of "non-denial denials" that were the hallmark of a troubled administration which ushered in its own Constitutional crisis some 45 years ago.
The markets have risen on reasonable expectations for a drastic change in fiscal policy, tax policy and regulatory policy, all of which, when taken together, would stimulate the economy, improve corporate profitability and let loose the animal spirits that, well, animate economic activity.
The market has rallied to a succession of all-time highs, gaining nearly 10 percent since the day after the election.
However, as CNBC's markets commentator Mike Santoli recently noted, the market is looking a bit technically tired. It appears overbought in the short-term and in need of a restful consolidation of its recent gains … or at least until the hope of policy reforms become reality.
More worrisome, to me, however, is the degree to which the market has become complacent … not about policy risk, but about rising domestic political risk.
Certainly, the president's supporters might call his recent political setbacks a tempest in a teapot; however, it could turn out to be a tempest in a Teapot Dome … or worse.
The resignation of General Michael Flynn, the stated reasons for which notwithstanding, should lead a seasoned observer to worry that, as in corporate scandals, the first headline is rarely the worst, nor the last, in a situation where an on-going investigation has yet to reach any conclusions about potential illegalities.
"The Washington Post" reported on Thursday that Federal Law Enforcement officials believe Flynn may have misled the FBI over the contents of his conversations with a Russian Ambassador involving sanctions that were being applied to Russia for allegedly interfering in the presidential electoral process.
If true, lying to federal prosecutors is a felony offense and could, conceivably, lead to General Flynn becoming a cooperating witness in this investigation of Russian interference, should he choose, or be pressured, to do so.
The president's latest pick for National Security Advisor, to replace General Flynn, turned down the job.