By Greg Valliere
Horizon’s Chief Global Strategist

May 9, 2018

Israel’s Military is Moving; Michael Cohen, Radioactive; Take-aways from Last Night’s Elections

THE NEXT GREAT CRISIS: Even proponents conceded that the Iranian nuclear deal was flawed, and the U.S. withdrawal yesterday was hardly a surprise; the Iranians cheat at every opportunity and the European angst seems to be over a lost opportunity to make money in Tehran. The real issue, in our opinion, is the growing likelihood of an imminent Mideast conflict.

THE MOST CHILLING DEVELOPMENT in the last 24 hours was the apparent Israeli missile attack on an Iranian-backed army base south of Damascus. The Israelis say their forces are on “high alert” and reservists have been called to duty amid speculation that Benjamin Netanyahu will carry out his vow to deal with Iran “sooner rather than later,” confronting Tehran’s growing military presence in Syria, Iraq and Yemen.

AN ALL-OUT ASSAULT by Israel against Iranian forces could become a proxy war, with Israel, Saudi Arabia and the U.S. aligned against Russia’s proxies, Iran and Hezbollah. With the U.S. now out of the nuclear deal, Netanyahu may feel unrestrained – and this morning’s run-up in oil prices may be sending a signal of a looming conflict.

MICHAEL COHEN, RADIOACTIVE: One has to assume that the files seized when Michael Cohen’s offices were raided contained enormously damaging information that – of course – will be leaked to the press. So there are two new names to add to the spy novel that is engulfing the Trump Administration: Essential Consultants, a Cohen-owned company that received $500,000 from Columbus Nova, a firm with ties to a Russian oligarch.

COHEN ALMOST CERTAINLY FACES CHARGES of money laundering and bank fraud, and now must address a great dilemma: does he turn on Donald Trump, or does he refuse to cooperate, thus facing several years in jail? Trump has already shown signs of throwing Cohen under the bus – not a wise move, in our opinion, because what Cohen knows could be more of a threat to Trump’s presidency than anything Robert Mueller has uncovered.

ELECTION TAKE-AWAYS: Mitch McConnell should be breathing easier after the landslide defeat in West Virginia of an ex-con who attacked the “China people” in the Senate Majority Leader’s family. A relatively mainstream Republican won the GOP Senate nomination last night, which means incumbent Democrat Joe Manchin is in real danger of losing his seat this fall; no Roy Moore repeat here.

THE BIGGEST SURPRISE last night came in the suburbs of Charlotte, where incumbent GOP Rep. Robert Pittenger lost to former pastor Mark Harris, who – like many successful Republicans yesterday – ran against the “Washington swamp,” which apparently has not been drained. Pittenger discovered that allegiance to Trump is not enough; he voted for the spending pig-out earlier this year, and voters didn’t forget.

OUR BOTTOM LINE AFTER LAST NIGHT: There’s still a decent chance the House will flip back to the Democrats, but Republicans are favored to win West Virginia and Indiana Senate seats now held by shaky Democrats – so the GOP has a chance of retaining control of the Senate, maybe even adding a seat or two.