Features

Will stocks slump if the US dumps Trump?

What would impeaching Donald Trump actually mean for financial markets?

911_MW_P06_Markets_Bottom

Stockmarkets were unfazed by the Clinton impeachment drama

Following chatter that he might be impeached, President Donald Trump warned that any such move would lead to a market crash and "everybody would be very poor". He was speaking after his ex-lawyer Michael Cohen pleaded guilty to violating election rules. But what would impeaching Trump actually mean for financial markets?

Not a lot, is the likely short answer. The first reason for this, according to Fidelity's Tom Stevenson in The Daily Telegraph, is that his most economically positive policies have already been implemented. Were Trump to be removed, his replacement Mike Pence would be unlikely to change tack. Besides, investors are generally happy to overlook political dramas in Washington and focus on the economic and market fundamentals instead.

When Richard Nixon resigned rather than face removal from office, the market, says Stevenson, responded positively "to a clearing of the air after the Watergate scandal". Following the impeachment of Bill Clinton in 1998 after he lied about his affair with Monica Lewinsky, the markets remained unperturbed too.

At present the US economy continues to gather steam. Corporate profits are rising strongly, driven in part by Trump's corporation-tax reforms. Wages have gone up by 2.7% during the year to July, while employment has fallen below 4%.

But by 2019 the boost from tax cuts will begin to fade, interest-rate increases will start to bite, and the global economy will be slowing as a result of protectionism, says The Observer. That's why the mid-term elections could result in a Congress hostile to Trump. "All bull markets end sooner or later" and the second 18 months of Trump's presidency presage "a choppier time" for Wall Street, says The Observer, whether Trump is impeached or not.

Recommended

Joe Biden’s spending spree will lift American spirits and markets – but it comes with a sting in the tail
US stockmarkets

Joe Biden’s spending spree will lift American spirits and markets – but it comes with a sting in the tail

New US president Joe Biden is planning to throw trillions of dollars in stimulus at his country’s economy. Markets will love that. But it comes with a…
25 Jan 2021
Think Tesla is a bubble? This might be the best way to bet on it bursting
Oil

Think Tesla is a bubble? This might be the best way to bet on it bursting

The huge rise in Tesla’s share price means that, by market value, it’s now the sixth-largest company in the US and and the world’s biggest car-maker. …
25 Jan 2021
Three clean energy stocks for your portfolio
Share tips

Three clean energy stocks for your portfolio

Professional investor Christian Roessing of the Pictet Clean Energy Fund highlights of his three favourite stocks at the forefront of the clean energy…
25 Jan 2021
The MoneyWeek Podcast: let's talk about bubbles
Stockmarkets

The MoneyWeek Podcast: let's talk about bubbles

Merryn and John talk about the many obvious signs of a bubble in certain assets, including tech stocks, TikTok, and stock-trading 12-year olds. It's c…
22 Jan 2021

Most Popular

The FTSE 100 is set for a makeover with an influx of new tech stocks
UK stockmarkets

The FTSE 100 is set for a makeover with an influx of new tech stocks

The FTSE 100 – the dullest index in the world – is about to reinvent itself as a host of new firms list on the market. The change is long overdue, say…
24 Jan 2021
Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021
Think Tesla is a bubble? This might be the best way to bet on it bursting
Oil

Think Tesla is a bubble? This might be the best way to bet on it bursting

The huge rise in Tesla’s share price means that, by market value, it’s now the sixth-largest company in the US and and the world’s biggest car-maker. …
25 Jan 2021