White House Uncertainty Jolts World Markets Into The Red.

August 17, 2017

False rumors of Cohn’s resignation sent the markets into a controlled selloff today.

The increasing uncertainty in the White House has filtered through to world markets this week, with European and US indices well in the red.

Unlike last week’s North Korea scare, which has all but dissipated for the time-being, the latest problems in the White House could have far broader implications. Following Trump’s statements post Charlotteville, various members of his advisory councils have quit in protest. The rift between Trump, the Republican Party, the Democrats, Business and Social leaders appears to be growing larger.

Today’s rumor, that Gary Cohn was to resign as Trump’s economic adviser, sent markets into a tailspin that accelerated into the close. This rumor turned out to be false, but that didn’t stop the selling.

Why today’s news matters.

This week has been one of the most challenging for what has been a challenging Presidency. The “business” President no longer has support of business leaders. This is significant, without the support of those that Trump claims to represent, he is increasingly becoming a toothless tiger. Even being associated with the Presidency could be bad for a CEO, and therefore a company’s, reputation.

The market knows this, and is selling off into the uncertainty. The VIX popped again, and there were not any buyers into the close, as there was yesterday. It seems as though traders are taking a more cautious approach to risk, with safe haven flows also evident later in the day.

It will be interesting to see how Asia trades in the morning, and how we end the week. If risk is truly off, I’d expect to see a flat or down day tomorrow, with VIX increasing as traders look to protect their position. High growth tech stocks suffered today, lets see how they go tomorrow.

Are the bulls waiting in the wings? It will be interesting to see if they step up and see this as a “buy the dip” opportunity, or perhaps this increase in volatility is the beginning of a deeper correction.