I think it’s way too early for analysts talk of political risk to our financial market, but when there is turmoil and authentic scandal it can crush economies and markets.  Today, news of a budding scandal in Brazil has rocked their stock market, which had only just begun to recover from the ousting of the previous scandal-scared president.

Reports of evidence Michel Temer has paid a bribe to a member of congress sent the Bovespa down 10% at the start of trading forcing the market to be closed for thirty minutes.  Brazil’s currency is also under significant pressure.  Already media outlets in the country are calling for the president to step down.   It doesn’t help that Brazil is currently suffering record-high unemployment and its worse recession ever.

The 16.9% decline in the Bovespa underscores what can happen when there is political scandal in the highest office and should serve as a reminder of why such allegations are reckless and dangerous, too. 

Mixed Manufacturing Message

Today, the Philly Fed Manufacturing Survey came in at a reading of 38.8 from 22.0 in April against consensus of 19.6, but expectations (assumptions for six months from now) plunged, and I think that’s a direct reflection of worries about Washington, D.C. moving the Trump legislative agenda.

The market overall has been stronger sooner than I anticipated, but it’s too soon to take the bait. The real test comes in the last hour of trading, but this is a positive sign thus far.