Brian SozziEditor-at-Large,Yahoo Finance
The impeachment of President Trump may not be that bad for investors, stock market experts suggest.
“This impeachment process may actually be good for U.S. equities. Trump could fight only so many battles. With everything going on with his own reputation and the likelihood of him being elected next year, he will begin focusing a lot more on that and probably a lot less on China. That means either a trade deal with China gets put on the back-burner, which would not be the worst deal for U.S. investors. Or, Trump comes out with a watered down deal to just get it done and behind him,” said money manager Thomas Fross of Fross & Fross Wealth Management on Yahoo Finance’s The First Trade.
Invesco Chief Market Strategist Kristina Hooper agrees.
“We could have the Fed stepping in and saying just like with trade, we’ll try to be more accommodative maybe with another insurance cut if they are worried there could actually be an impeachment to really breathe confidence into markets. So it could turn out to be a positive,” Hooper said. “The Trump administration’s policy agenda has been a mixed bag. Part has been pro growth like tax reform. But one could argue that their trade policy runs antithetical to growth. So, the presumption could be you will see a mixed reaction if there is another president because there would be the potential for the trade wars to go away depending on who that next president is.”
Thus far, the market has generally ignored the daily escalation in rhetoric down in DC between the Trump administration and Democrats on the impeachment front. September saw the Dow Jones Industrial Average and S&P 500 rise 3.1% and 2.5%, respectively. The Nasdaq Composite gained a more modest 1.6%, held back by the trade war’s financial impact on semiconductors such as Micron and an epic selloff in momentum name Netflix.
What happened during Clinton and Nixon
At this juncture, Mr. Market heads into the final quarter of the year thinking impeachment proceedings on Trump will resemble Bill Clinton’s more so than Richard Nixon’s.
Bill Clinton headshot over subdued image of US Senate chamber at beginning of impeachment proceedings, partial graphic
In the two months before Clinton’s Senate acquittal in February 1999, the S&P 500 rallied about 10% according to JPMorgan data. Although not amidst the economic boom fueled by the dot com era a la Clinton’s time in office, the Trump economy continues to be one characterized by steady job gains and low historical unemployment. So in effect, the market’s read is that the U.S. economy could handle not only nasty impeachment headlines but also an impeachment of the president.
A friendly Federal Reserve also remains in play at the moment.
But while the bulls have control of the narrative, they shouldn’t forget the downside risks of possibly impeaching a president, warns former New York Stock Exchange floor trader Stephen Guilfoyle. He is right that the risk is high even if most investors continue to focus on the positives.
In the six months before Nixon resigned, the S&P 500 declined about 20%, gold spiked 15% and the 10-year yield increased 120 basis points, JPMorgan data shows.
But hey, at least we know where the president stands on the stock market outlook in a world minus him on the throne.