Mueller Report: Yawn or Correction Trigger?

As Washington braces for Thursday’s release of the Mueller report, investing strategists are trying to assess what it could mean for the U.S. stock market.

Special Counsel Robert Mueller’s report covering President Donald Trump and Russian election interference is expected to run about 400 pages without exhibits and have portions that were redacted by Attorney General William Barr, who has promised to color-code and explain his redactions.

“Stormy weather may resume” for the recovering stock market, “if the report seems more provocative than Barr initially characterized in his four-page memo to Congress,” warned Charles Gabriel and Ian Katz of Capital Alpha Partners, in a note.

In a memo last month, Barr said Mueller’s long probe did not find evidence of collusion between Trump’s campaign and Russia, but it reached no conclusion on whether the president obstructed justice. The market  has been rallying since late December and has neared record highs that it achieved in September.

With Thursday’s release, Barr is expected to redact four types of material: grand jury information, classified info, material related to ongoing investigations and derogatory details about “peripheral third parties.” Capital Alpha’s strategists say the extent of these redactions could be another key for the market.

If the redacted Mueller report “does seem exculpatory, without too stifling a set of redactions, a relieved Trump White House could retain a perceived upper hand,” Gabriel and Katz said. They added that stocks then might avoid a storm: “This would suggest limited surprises in store for the financial markets.”

The report is likely to lead to outrage over its redactions, as well as give new life to accusations of obstruction of justice, said Greg Valliere, chief U.S. policy strategist at AGF Investments, in a note.

But the market’s reaction could be a “yawn,” Valliere added. “The markets have learned to live with the Washington dysfunction, and there’s no reason to believe the Mueller report will have any real impact on investors.”

Still, other strategists such as BTIG’s Julian Emanuel and Michael Chu are sounding concerned about the release.

It’s among the “numerous correction catalysts” that soon could hit after the equity market has staged a rally from its December bottom, they said in a note. “The release of the full, yet redacted, Mueller report by Attorney General Barr, scheduled for 4/18 — Holy Thursday — is likely to further ratchet up the political acrimony.”


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