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Signs of a Shift on Brexit; What Will Michael Cohen Say?
Author: Greg Valliere
STILL ANOTHER POTENTIAL NEGATIVE FOR THE MARKETS may be diminishing as a major concern — a delay or even a re-vote on Brexit may be in the works.
WITH INVESTORS ENJOYING enjoying a dovish Fed, reduced chances of a recession, and progress on China trade talks, Brexit has been cited as one of the few genuine worries, a great threat to U.K. and European economies. But the outlook may be shifting.
THERE WERE REPORTS OVERNIGHT THAT Prime Minister Theresa May is considering a delay in the March 29 U.K. exit from the EU, a high-risk move that reflects her inability to secure a workable Brexit deal. She previously has rejected a delay; if she's now wavering, May could face major defections from her inner circle and Conservatives in general. But Labour leader Jeremy Corbin also faces growing dissent in his party, so he has taken an equally bold risk — calling for a second referendum.
OUR SENSE IS THAT both Labour and Conservative leaders are so worried about a public revolt and a Brexit disaster that each party is willing to consider a new approach. A second referendum might not change the electoral outcome, and May perhaps cannot ever win an acceptable exit — but both of these developments could buy time, which, at the least, could diminish chances of chaos at the end of March. The pound has rallied on this news, with good reason.
WHAT WILL MICHAEL COHEN SAY? As we wrote yesterday, Jay Powell's congressional testimony today will be the big market story, but Michael Cohen will be impossible to ignore, based on leaks about what he will discuss. Democrats who have already interrogated Cohen say he will provide new information on Donald Trump's desire for a Russian business deal just months before the 2016 presidential election.
AND SOURCES ARE REPORTING that Cohen will discuss Trump's hush payment to Stormy Daniels in great deal, while also testifying about Trump's financial dealings. The president's allies will dismiss Cohen as a convicted felon with a history of lying, but this could take some of the glitz away from Trump's summit with Kim Jong-un — which may be the goal on Capitol Hill.
CONGRESS AS THEATRE: Cohen's testimony will reinforce a trend — Congress is far more interested in political stunts than actually enacting legislation. A vote to kill Trump's declaration of emergency will probably pass in both houses, but a successful veto is certain and everyone knows it. The Republicans, meanwhile, want a vote on the "Green New Deal" knowing that it will fail — but this will force Democrats to take a risky position on a radical piece of legislation. And then there's the Cohen circus today.
THIS WELL-SCRIPTED CONGRESSIONAL THEATRE is largely aimed at an election that's still over a year and a half away. We'll stick with our call that the real news will come from Powell, who sees no recession — and, crucially, no inflation threat.
The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
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Greg Valliere
Chief U.S. Policy Strategist
AGF Investments
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