There doesn’t seem to be much in the Trump administration merry-go-round that can rattle stock markets.
The president fired his top diplomat, Secretary of State Rex Tillerson, on Tuesday morning after 13 months on the job.
His top economic adviser, Gary Cohn, quit last week and CNBC commentator Lawrence Kudlow is succeeding him.
The director of the Central Intelligence Agency will take over from Tillerson, and a new director will step up.
Trump’s recent threat of tariffs on aluminum and steel imports, creating fears of an international trade war, have been put on hold pending the conclusion of a new North American Free Trade Agreement.
And yet, the markets have been somewhat muted in their response, as investors seem to ignore the political noise out of Washington and instead examine every economic data point for clues on where to move money.
“There’s been a lot of turnover in this administration, and the markets have come to terms with that,” said Ed Yardeni, president of Yardeni Research. Remember, he said, “we’ve got a president who was the star of ‘The Apprentice,’ where the key line was ‘You’re fired.’”
The blanket news coverage of the White House has telegraphed so much intrigue that the market is able to bake what-ifs into its prices far in advance of any official firings or resignations.
Tillerson’s departure had been rumored for months, ever since it was reported that he called the president a “moron” during a meeting last July with Cabinet officials at the Pentagon.
The Dow Jones industrial average dropped 1 percent, or 248 points, on Wednesday, on a weak February retail report. The Standard & Poor’s 500-stock index was down 0.6 percent, and the Nasdaq Composite fell 0.2 percent.
The yield on the 10-year U.S. Treasury note, a closely watched metric, had dropped to 2.821 percent. A 3 percent yield is viewed by many as a sign that investors are fleeing the risk of stocks for the relative safety of bonds.
The CBOE Volatility Index, better known by its ticker symbol VIX, was slightly up, by 2.39 percent, on Wednesday, reflecting a market anxiety that was absent in 2017.
“Rising interest rates, economic tensions with China, global tensions with Iran, North Korea and Syria — not to mention the Mueller investigation — mean that there will be no lack of surprises for Wall Street,” Michael Farr, a Washington investment manager, said.
Yet it appears that barring a Black Swan event like something out of North Korea, there is little the Trump administration could do to tank the nine-year bull market into a bear.
The Commerce Department on Wednesday reported that U.S. consumers retail sales slipped 0.1 percent in February, the first time in six years that retail sales have dropped for three consecutive months.
The Labor Department this week announced that consumer prices rose 0.2 percent last month, which was in line with expectations. The news calmed inflation fears. It followed the Labor Department’s monthly jobs report on Friday that showed robust job creation but limited wage growth. That report spiked markets up more than 440 points.
“This report all but guarantees an interest rate hike from the Fed at next week’s meeting,” said Jeff Carbone, managing partner for Cornerstone Wealth. “Now we need to look and see if we get three or four hikes this year.”
Markets dropped 10 percent a month ago when the CPI reported its biggest climb in four years, setting off fears that a festering wave of inflation was coming to bear. The markets have largely recovered on good news since then.
Within minutes of Tuesday’s CPI report, Trump announced in a tweet that Tillerson had been fired after 13 months and would be replaced by CIA Director Mike Pompeo.
“Once again, the most important thing is the dog that didn’t bark,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “Markets were expected to drop on the announcement of tariffs – and didn’t. Then Cohn’s resignation was expected to drive them down – and didn’t. The replacement of Tillerson as Secretary of State is also failing to rock markets.”
McMillan said last month’s correction may have driven most of the nervous investors from the market, leaving “a much tougher crowd.”
“For those investors, the continued strong job growth and confidence across the board suggests company earnings – and therefore stock prices – are likely to keep improving,” he said. “I expect the markets to stay well supported – and likely head higher – until the economic news softens.”