Investors were shelving rosy hopes for U.S. tax reform and rethinking strategies premised on Donald Trump's economic growth promises on Wednesday, as the President faced his loudest criticism yet over possible collusion between his election campaign and Russia.
From stocks to bonds to the U.S. dollar, a bevy of trades that have been fashionable since Trump's election last November, were getting dialed back or in some cases shredded as his reform agenda looked increasingly vulnerable amid the fallout from his firing last week of James Comey, the director of the Federal Bureau of Investigation.
The uncertainty about Trump's future increased in the last 24 hours over allegations Trump had sought to end Comey's investigation into ties between the president's first national security adviser, Michael Flynn, and Russia, and even some Republicans were now calling for a deeper probe into possible obstruction of justice.
The result was the harshest sell off yet in U.S. stocks since Trump was elected and a jettisoning of positions that were tied to the notion that his policies would stoke economic growth and inflation.
"This has created opportunities for investors," said Richard Benson, managing director, co-head of portfolio investments, Millennium Global Investments, London, who said they had been short U.S. dollars against European currencies. "And right now, we're looking at these opportunities."
On Wednesday, one key indicator of the level of inflation five years from now fell to its lowest since late November. Meanwhile, the U.S. dollar, which had surged more than 5.0 percent after Trump's election, was effectively back to its Election Day level.
U.S. House Speaker Paul Ryan said on Wednesday that Republicans were determined to keep pursuing tax reform, although such efforts could be seriously hampered. Democratic Representative Jim Himes, a member of the House Intelligence Committee, told MSNBC that the "legislative agenda...(was) lying in ruins."
A longshot worry is the uncertainty that could be presented if Trump is actually impeached by the U.S. Congress. A small but growing number of Trump's fellow Republicans called for an independent probe of possible collusion between his 2016 campaign and Russia, and one mentioned impeachment.
Investors said that was not necessarily a market negative, if Vice President Mike Pence were to take over.
Reference: Reuters
Read more: http://www.reuters.com/
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