Political risk on Wall Street? Buy the dip!

Political risk on Wall Street? Buy the dip!
From Reuters - December 1, 2017

SAN FRANCISCO (Reuters) - An abrupt stock selloff on Friday, sparked by a report that magnified concerns about President Donald Trumps potential links with Russia, prompted Wall Streets favorite reaction in recent months: Buy the dip.

The phrase - or a cruder version abbreviated to BTFD - has become a refrain among traders who, nearly nine years into a bull market, have become accustomed to steadily climbing prices, interrupted only by occasional hiccups.

The latest example came on Friday as the S&P 500 slumped as much as 1.6 percent after ABC News reported that former U.S. national security adviser Michael Flynn was prepared to testify that Trump directed him to make contact with Russians when Trump was a presidential candidate.

With investors perennially wary of uncertainty, the CBOE Volatility index .VIX, Wall Streets fear gauge, spiked to its highest in more than three months.

But in under an hour, markets mostly recovered, with the S&P 500 down just 0.3 percent for the session.

Flynn also pleaded guilty on Friday to lying to the U.S. Federal Bureau of Investigation about Russia. His cooperation with special counsel Robert Mueller marks a major escalation in a probe that has dogged Trumps administration since the Republican president took office in January.

Weve kind of gotten used to the drama in the White House, said Rob Stein, chief executive of Astor Investment Management in Chicago. Whether or not they prove that there are Russian relationship ties, that doesnt have a long-term effect on the value of the stock market.



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