Why US market is shrugging off Cohen, Manafort convictions: Peter Cardillo, Spartan Capital Securities

US market sure even if Trump has to resign, policies will continue under Mike Pence, Peter Cardillo, Chief Market Economist, Spartan Capital Securities, tells ET Now

Do you think the convictions of Paul Manafort as well as Michael Cohen and the latter admitting to charges on eight counts are a big deal because that directly implicates President Donald Trump himself?

Yes, that is correct but the markets do not seem to be too worried about that right now. The reason for that is that the market is convinced even if the situation becomes more intense for Trump and should the President resign, Vice President Mike Pence would be the new President and the macro situation would not change. The administration’s policies would continue and that is one of the reasons why the market has thus far have not really been all that concerned.

The bull run has been on for almost 9-10 years now. Right now also, S&P is surging to record highs and the bulls are still continuing despite volatility, trade wars and macro concerns. What is really fuelling this rally and will it be sustained from medium to long term?

The fundamentals are very strong in the United States and the global marketNSE 0.00 % is doing pretty good. When you have the fundamentals in place, you can continue to have a bull market. That does not mean that there are not concerns out there or potential problems that could reverse market sentiment and economic activity.

If the trade war were to intensify, obviously the market would begin to act negatively because you would then break the back of the strong corporate earnings that corporate America has been reporting and that is all due to the good economic environment.

In spite of higher interest rates, the economy continues to perform and the reason for that is rates have still not reached a normalised level. That has given a big push to corporate America and the fiscal reforms have helped many corporations to buy back their securities and that is basically adding cushion to the market.

What about this entire tussle between the Fed and the Trump? I mean it perhaps would be a bit too early to call it a tussle of sorts but this is the second time that Trump has called out to the Fed for hiking rates. How do you see this play out over the long term? Do you think the Fed is going to continue with its own dot plot and raise interest rates?

Absolutely. Barring any increasing trade war problems, the Fed is going to raise rates at least two more times this year, certainly in September and perhaps in December as well. They made it very clear in the minutes and said the economy is strong and the only fear they have is the trade war.

If we can escape the trade war from expanding from these levels, then the Fed will continue to raise rates. If there is no agreement with China or perhaps the rest of Asia, then that will be a problem and they could hold the hiking process. But for now, it is a green light and we will get some sort of agreement with the Chinese. It might not be what the administration wants and certainly not what Trump wants.