Mama Said There'll Be Days Like This

What do you get when political actions occur which result in steadfast denials from one camp and a lynch mob from the other? When these things happen, you get days like this.

What you get is the potential for a major shift in sentiment as market participants focus on current events in Washington, gauging whether they will result in the inability for the current administration to fulfill campaign pledges.

You get a day that results in the Dow Jones plunging 310 points, lower 10-year yields, a lower U.S. dollar, and a massive surge in gold prices.

What you get is a primary shift of investor optimism to investor uncertainty and pessimism. The optimism that was created by the current administration's bid to create infrastructure programs and implement significant tax cuts and regulatory reform is being replaced by the sobering truth that many of these pledges may not come to fruition.

The fact of the matter is that regardless of the outcome of recent events, this administration will now have to focus much of its energy, time, and resources on resolving these issues rather than on implementing campaign promises.

"If special prosecutors are hired or there is more talk about obstruction of justice being an impeachable offense, one can kiss the tax plan, health care plan, and fiscal stimulus plan goodbye for 2017," Andy Brenner, head of international fixed income securities at National Alliance Securities, said in a note Monday,” according to CNBC.

Gold Returns to Favor

One outcome of the recent events in Washington is a significant surge in gold prices. Today alone gold futures closed up $23 on the day, a net gain of +1.86%. In fact, gold has gained over $35 this week alone. Although a weakening U.S. dollar primarily drove this recent price advance, today’s action was mainly due to traders bidding up gold prices.

Although the net result of this political turmoil is unknown, the likelihood that these events will lead to a presidential impeachment is relatively small. The real concern is how long it will take this administration to resolve their current dilemma and return their focus back to accomplishing and implementing the major changes promised during their campaign.

Wishing you as always, good trading,