Market Insider

The stock market doesn't see a big risk for Trump in Mueller probe right now

Key Points
  • The Mueller report would be a problem for the market if it threatens President Trump's tenure in the White House, and stocks could rally if he is seen to be in the clear.
  • "There's Trump the man," one strategist says. "Then there's Trump the agenda, and the market loves the agenda — lower taxes, less regulation, pro-business. Anything that is potentially disruptive to that agenda is bad. Or anything that is going to prevent the agenda from being stopped is good."
Robert Mueller
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The Mueller probe has been hanging like a dark cloud over the White House, but maybe not over the stock market anymore.

The exit of Attorney General Jeff Sessions comes as expectations build for a final report from special counsel Robert Mueller that will show whether the Trump campaign colluded with Russians or not, among other things. But President Donald Trump's naming of Matt Whitaker as an interim attorney general has assuaged some concerns on Wall Street that Mueller will find Trump at the center of his probe.

"I think the market consensus is they probably have something but not enough to change the administration," said Art Hogan, chief market strategist at B. Riley FBR. "I think the market looks at this as yes, it's a bit of an overhang, but not one that's going to create a constitutional crisis. ... I think that's been compartmentalized."

Trump has repeatedly said there was no collusion between his campaign and Russia. So far, Mueller's probe has led to the indictments of more than 30 people, including mostly Russian nationals, but also former Trump campaign manager Paul Manafort and former National Security Adviser Michael Flynn.

Trump, however, appears ready to point to any potential problems he might face as a reason behind stock market weakness. As stocks sold off Monday, Trump tweeted that the "prospect of Presidential Harassment by the Dems is causing the Stock Market big headaches!"


"There's Trump the man," said Wedbush Securities' Steve Massocca. "Then there's Trump the agenda, and the market loves the agenda — lower taxes, less regulation, pro-business. Anything that is potentially disruptive to that agenda is bad. Or anything that is going to prevent the agenda from being stopped is good."

"To the extent that people think the Mueller investigation is not going to do anything negative to the Trump administration, they will like that," said Massocca. "Whitaker is very supportive of Trump, and he's publicly made negative comments about the Mueller investigation."

While strategists do not see a huge threat to Trump from the Mueller probe at this point, there are still doubts about what might come up elsewhere.

"Mueller is investigating Trump and Russia cooperation in influencing the election. If he can't show it, it's got to be a bullish signal. NY AG is looking into Trump's personal financial dealings. That's a risk that has legs," said Jack Ablin, chief investment officer at Cresset Wealth Advisors.

Federal prosecutors in New York, meanwhile, are separately investigating whether there was violations of campaign finance law in the payoffs of porn star Stormy Daniels and Karen McDougal. Trump's former lawyer, Michael Cohen, pleaded guilty to campaign finance violations and is cooperating with prosecutors.

Sessions resignation 'nonevent'

Around election time, there was little information on the status of the Mueller's investigation. Strategists say the market has become less sensitive to developments in the investigation than it was initially.

For instance, when ABC incorrectly reported in late 2017 that Trump had directed Flynn to make contact with the Russians before the election, the Dow dropped 350 points. ABC later corrected that report.

When Sessions resigned last week, market pros said it was a nonevent and that it was expected.

"I think what's baked in to the market is as far as the investigation goes, he may have been surrounded by some pretty bad actors and they may well be punished but he may not end up at the center of this," said Hogan. "We don't know what's coming out. This is an investigation that has kept almost all of the findings close to the vest. Anything that comes out could be surprising."

Democrats have called for Whitaker to recuse himself from oversight of the Mueller investigation, because of his past criticism of Mueller. Whitaker has accused Mueller of "going too far," and once tweeted a message likening Mueller's prosecutors to a "lynch mob." Trump on Friday said he had not discussed Mueller with Whitaker.

Whitaker will receive Mueller's final report and decide what to do with it. "I think that market was happier that Whitaker was put in charge than that Sessions was let go," Massocca said.

What does it mean for compromise?

Larry McDonald, head of the U.S. macro strategies at ACG Analytics, said the lack of harmony after the midterm election was dragging on the market Friday.

Trump "clearly warned the Dems if they go down the road of investigations, the entire potential for fiscal stimulus is off the table," he said.

A stimulus package is one area where the Democratic House might find common ground with the White House. McDonald said such a package would be good for growth.

McDonald said tensions are already rising despite the fact that Trump and House Democratic leader Nancy Pelosi each held out an olive branch. But Whitaker has become a point of contention, as has the continued counting of ballots in Florida where Trump has said Republicans have won.

"The recounts plus Mueller stuff is a nasty cocktail which basically is taking the juice out of the market because the probability of [Pelosi] and the Dems working with Trump is plummeting," he said. "Those two things combined could kick off the investigation routine, and if, as Trump said, they go down that road then it's basically war. There's no fiscal anything."