CNBC’s Ron Insana fears that the controversy surround President Donald Trump and the firing of FBI Director James Comey amid a probe of alleged Russian influence of U.S. elections could ultimately be fatal to the recent stock bull market.
“I am among the few who believe that President Trump's term will be attenuated, much in the same way as Nixon's second. I can foresee many reasons why even Republicans will ultimately see an advantage in forcing Trump's resignation and working with a president named Pence,” Insana wrote for CNBC.com.
“If the Trump administration ultimately fails to survive the political turmoil that intensified, without warning this week, one could rightly assume that the stock market could be vulnerable to an extended pullback," wrote Insana, a CNBC and MSNBC contributor and the author of four books on Wall Street.
"It could easily suffer a 10 percent to 20 percent correction as a consequence of a constitutional crisis which may well be in the making,” Insana predicted.
“I would bet against Trump on this one and take some precautions in the market. Traders may want to protect their portfolios and simply raise cash. In addition, buying puts (a contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time) on the S&P 500 could be a profitable trade as disgruntled intelligence types leak more and more details about on-going investigations,” Insana advised.
“For longer-term investors, holding off on adding to existing stock market positions may make sense here, as stocks could be markedly cheaper later in the year. It seems this may well be a ‘sell in May and go away’ type year,” Insana wrote.
“I would put my pennies back to work when Pence becomes president. While not everyone may agree with the veep's stance on social issues, he is a stable adult with far more experience getting bills turned into laws. In that respect, tax reform, deregulation, infrastructure spending and other economic stimulants would likely have an easier time making it through Congress and on to his desk.”
For its part, the Federal Reserve recently downplayed weak first-quarter economic growth while emphasizing the strength of the labor market, in a sign it was still on track for two more rate rises this year.
In a bullish statement following the end of a recent two-day policy meeting, the central bank also said consumer spending continued to be solid, business investment had firmed and inflation has been "running close" to the Fed's target, Reuters reported.
"The committee views the slowing in growth during the first quarter as likely to be transitory," the Fed said in a unanimous statement.
The labor market continued to strengthen even as growth in economic activity slowed and "the fundamentals underpinning the continued growth of consumption remained solid," policymakers added.
The central bank's affirmation that it was optimistic on economic growth and that its rate rise plans remained intact bolstered the dollar against the euro and yen and pushed Treasury yields slightly higher.
"They went out of their way to emphasize this is not something they see persisting and pretty much says to me that their two rate hikes are still on the table for the balance of the year," Heidi Learner, chief economist at Savills Studley, told Reuters.
Obviously, other respected voices disagree with Insana.
For his part, veteran financial guru and former Ronald Reagan adviser Larry Kudlow is urging any impatient investors to just give Trump a chance to fully enact his strategies to reform healthcare, spark economic growth and redesign the tax system.
After all, Trump has been in office a relatively short time and has inherited a mountain of problems from the past two decades. “He's trying to fix a lot of problems that have gone unfixed in the last 20 years,” Kudlow explained to CNBC.
Meanwhile, many other respected economic voices are predicting robust growth and additional stock-market gains amid Trump's blueprint to truly "Make America Great Again."
David Horowitz, author of the best-selling book "Big Agenda: President Trump's Plan to Save America," told Newsmax TV that the market rally since Republican Donald Trump won the election has more room for gains as the president pushes his pro-business agenda.
“There's more upside. Starting from when he was president-elect he started this stock market boom,” he told Newsmax TV's “The Income Generation Show.”
“There will be corrections. There are going to be setbacks along the way like the healthcare which they hurried too fast. If you're looking over the long term of this administration I think the stock market is going to love Trump,” Horowitz said.
(Newsmax wires services contributed to this report).
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