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A Constitutional Crisis Looms
Author: Greg Valliere
WE'VE BEEN FOLLOWING WASHINGTON for a very long time, and have never encountered a climate as poisonous as this one, with both sides eager to provoke a Constitutional crisis that could persist for a year or longer.
THE BATTLE LINES ARE DRAWN: President Trump believes Democrats are questioning his legitimacy after an election — marred by blatant Russian interference — that he lost by 3 million votes. Now he will exert executive privilege, refusing to allow his current and former aides to testify before Congress; they have damaging stories to tell.
THE DEMOCRATS, MEANWHILE, are prepared to take several cases to the Supreme Court, insisting that Trump has far exceeded his legal authority to withhold information. For the divided Democrats, this litigious path is preferable to an immediate impeachment drive, because if they simply wait, Trump's self-destructive tactics may make impeachment easier to pursue.
TWO CONSTANTS: First, based on what's known now, there aren't 67 votes in the Senate to convict Trump even if the House votes to impeach. Second, the financial markets have largely ignored this Washington spectacle; investors are correctly focusing on the solid economy and other fundamentals.
BUT THERE ARE WARNING SIGNALS: The Mueller report — followed by Trump's inexplicable failure to move on and accept a mixed verdict — have softened the president's polling numbers. His job approval rating is now below 40% in some polls, close to the lowest level of his presidency. Republicans are worrying about his re-election prospects, and — more importantly for them — they worry about some very tough Senate races in moderate states where Trump is increasingly toxic.
WE STILL THINK TRUMP WILL BE THE GOP NOMINEE: A primary challenge from the suddenly combative Mitt Romney would be a waste of his time and money; Trump has the nomination locked up. But his general election prospects have slipped in recent days and may ebb further is there's a Constitutional crisis with Congress, with an increasing perception of a furious president (he has banned his aides from attending the White House Press Correspondent's dinner this weekend).
TRUMP'S LIFE PRESERVER is the Democrats, still veering sharply to the left and willing to tie Capitol Hill in knots with subpoenas and hearings. The House smells blood, and will not relent. Trump needs to stop rising to the Democrats' bait, but what makes this looming crisis suspenseful is Trump's eagerness to always rise to the bait.
BOTTOM LINE: At a minimum, we're looking at bitter gridlock and ferocious court battles; at a maximum, there could be a surprisingly close vote to impeach in the House. Senate acquittal still is likely. Disturbingly, there's another risk — Trump could go off the rails as his own aides, forced to testify, confirm obstruction of justice and tax avoidance.
THIS MAKES US WORRY that Trump will attempt to change the subject by seeking distractions, becoming more erratic on everything from North Korea to the China trade deal to attempting to fire an uncooperative Fed Chairman. Policy uncertainty is an increasing risk.
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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About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF's suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.
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Greg Valliere
Chief U.S. Policy Strategist
AGF Investments
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