Stocks have mostly shrugged off the fact that President Donald Trump could be impeached by the House of Representatives, and investors might be betting that the markets will rally the way they did after former President Bill Clinton was sacked and then not convicted by the Senate.
“The Senate is just going to ignore it. It’s probably at worst a distraction. I really don’t think investors will take the risk of impeachment seriously at this point. If there’s really strong damning evidence, that’s a different matter.”
House Speaker Nancy Pelosi, D-Calif., announced Tuesday the House will pursue a formal impeachment inquiry into whether Trump sought foreign aid from Ukraine in the smearing of a potential 2020 challenger, former Vice President Joe Biden.
When the announcement was first made, stocks took a dive. But that also coincided with an anti-China portion of Trump’s speech at the United Nations General Assembly. Markets have whipsawed with seemingly every word — positive and negative — about the ongoing trade war with China.
Modest gains followed on Wednesday, with the S&P 500 and Dow Jones Industrial Average both rising 0.6%, and the Nasdaq gaining 1.1%.
Stock futures this morning were mostly trading in the black. The S&P 500 and Nasdaq were both up about 0.1% and the Nasdaq was flat at 9 a.m. EDT.
The Democrat-controlled House could very well vote to impeach Trump, but like Clinton, who had a Democrat-controlled Senate, this GOP-controlled Senate is unlikely to convict their president.
“The Senate is just going to ignore it,” Cresset Wealth Advisors Chief Investment Officer Jack Ablin told CNBC. “It’s probably at worst a distraction. I really don’t think investors will take the risk of impeachment seriously at this point. If there’s really strong, damning evidence, that’s a different matter.”
JPMorgan analysts said impeachment conjures up several possibilities for the markets, namely the China trade war, relations with Iran and of course a number of implications for the 2020 elections.
Also at greater risk now is the new United States-Mexico-Canada Agreement (USMCA), and impeachment likely weakens Trump’s hand against China and could force him to take a worse deal just to get something done.
“The president’s approval rating has been tied to better news on China trade over the last year and a half,” Strategas policy analyst Dan Clifton told CNBC. “He needs to govern and start showing accomplishments. China is the best way for him to do that.”
Clinton was impeached by the House but acquitted by the Senate in February of 1999, and the S&P 500 rallied a massive 28% from January of 1998.
“Sure, there was a decline of 20% at one point in between, but that was due to the Russia crisis and the collapse of Long-Term Capital rather than anything to do with what was going on in the White House,” Bespoke co-founder Paul Hickey said.
JPMorgan analysts say the biggest impact on markets likely won’t happen until we have a better idea of who the Democratic nominee will be.
“The range of scenarios won’t narrow until Democratic primaries in Q1/Q2 2020 make the Democratic nominee clearer. So definitely an issue worth thinking about, but not an issue worth investing or hedging around yet,” they wrote.