• 2 hours Rise Of EVs Signals Peak Gasoline
  • 20 hours Jeff Bezos Doubles Down On Space Colonization Ambitions
  • 1 day Gold Mining Stocks Stuck In Limbo
  • 2 days Executive Order Targets Huawei Over Espionage
  • 2 days Why Now May Be The Best Time Ever To Hold Gold
  • 3 days Fake News Sinks Shares In UK-Based Bank
  • 3 days De Beers To Build $468 Million Diamond Recovery Ship
  • 3 days Moody's: Turkey Faces Possible Credit Downgrade
  • 3 days Tesla's Solar Sales Are Slipping
  • 4 days Auto Industry To Get Temporary Tariff Relief
  • 4 days Welcome To The World’s Biggest Free Trade Area
  • 4 days Central Banks Are Stockpiling Gold At The Fastest Rate In Half A Decade
  • 4 days U.S.-China Impasse Threatens Rare Earth Trade
  • 5 days Wall Street Bears $1 Trillion Brunt Of Trade War
  • 5 days Mobile Sports Betting Isn’t Quite Minting Millionaires Just Yet
  • 5 days The Marijuana Industry’s Shocking Secret
  • 5 days A Generational Shift Is Quietly Unfolding In The Mining Industry
  • 6 days Pentagon To Pay $6 Billion To Help Build Border Wall
  • 6 days Beijing Backlash: Stocks Slammed, Gold Boosted
  • 6 days Market Sentiment At Its Lowest In 10 Months
Fake News Sinks Shares In UK-Based Bank

Fake News Sinks Shares In UK-Based Bank

UK-based Metro Bank is the…

Beijing Backlash: Stocks Slammed, Gold Boosted

Beijing Backlash: Stocks Slammed, Gold Boosted

In a classic flight-to-safety trade,…

  1. Home
  2. Investing
  3. Stocks

Markets Unchanged On Potential Trump Impeachment

Trump

Equity markets have curiously remained unrattled by one of the darkest days for the White House since the Watergate Scandal of the Nixon era.

Investors simply don’t seem to care that a guilty plea by president Trump’s personal lawyer Michael Cohen, as well as the conviction of his former campaign chief Paul Manafort, directly implicate the President and have substantially increased his odds of being kicked out of office prematurely.

The S&P 500 and Dow Jones have lost 0.17 percent and 0.27 percent, respectively, while the Nasdaq Composite has actually climbed a tenth of a percentage point by the time of this writing at precisely 1230hrs ET. To be fair, the markets broke the record for the longest bull run in history yesterday, so letting off a little steam seems in order.

What we are seeing is hardly a doomsday or sky-is-falling scenario that you would expect from such an epic development.

None other than Trump himself has predicted a catastrophe for the markets if Congress decides to impeach him. Maybe investors have already baked in such a possibility (or eventuality?), considering that Google searches for “how to impeach a president” soared nearly 5,000 percent after Trump’s historic win.

All this appears strange, but there’s a method to the madness.

First off, if push comes to shove, Trump’s impeachment drive is likely to play out like Clinton’s with the House indicting him but the Senate saving him. In other words, chances of him leaving office before 2021 are still pretty slim. Related: EU Weighs New Payment System With Iran To Skirt U.S. Sanctions

There are other more nuanced reasons:

#1 Trump has already delivered the goodies

This is arguably the biggest reason. We have already enjoyed the best of Trump’s agenda—tax reform and deregulation. Trump’s presidency has largely been beneficial for stock markets thanks in particular to generous tax cuts. The S&P 500 has climbed at a 20-percent annualized rate since Election Day, easily trumping (pun intended) the historical return of 9.4 percent since 1927.

Taxphoria has pushed corporate earnings to record levels. Just last December, the consensus analyst earnings for the S&P 500 of was $146. Companies have easily exceeded that mark, with operating income jumping 24 percent over the last two quarters and a combined EPS of $159 a share expected for the full year.

(Click to enlarge)

Source: Bloomberg

Further, tax reform is expected to be the gift that keeps on giving, with earnings continuing to rise at a rapid clip over the next couple of years. Meanwhile, the economy is growing by close to four percent, while unemployment has fallen below four percent.

The markets have already benefitted from Trump’s major policies, though it’s widely feared that he might undo the good work if he fully implements some of the others in the pipeline.

In other words, Trump leaving now might not be such a bad idea from a markets’ and economic perspective.

#3 Markets hardly cared during past impeachments

(Click to enlarge)

Source: Bloomberg

Another reason the markets remain unrattled is that they have always reacted indifferently to past impeachments (real ones not mere threats), continuing with their former trends in the midst of such drives.

Congress initiated impeachment proceedings against Nixon in February 1974 smack in the middle of the 1973-1974 bear market that was punctuated by an oil and forex crisis. The market continued falling, declining 30 percent through October that year.

Related: Is This One Of The Most Exciting IPOs Of The Year?

The House voted to impeach Clinton in December 1998 yet stocks kept rising in the Dotcom boom until his acquittal in February 1999.

So, Mr. Market doesn’t seem to care too much about minutiae like change of guard at the world’s most powerful office.

#4 President Pence is ‘cool’

Vice President Mike Pence is likely to step in after Trump vacates office. That would be a pretty tumultuous development that’s likely to put the markets in a temporary tailspin given what Trump has come to represent.

But once the dust settles, Pence might actually turn out to be a pretty good president, one who favors conventional policies instead of Trump’s often divisive economic nationalism. He is likely to align more readily with trade groups such as the Chamber of Commerce Republicans and would probably bury the hatchet with Europe.

China, though, might not come off so lucky with Pence likely to continue playing hardball--though probably not in a way that directly threatens the American economy.

By Alex Kimani for Safehaven.com

More Top Reads From Safehaven.com

Back to homepage

Leave a comment

Leave a comment