Will stocks slump if the US dumps Trump?

What would impeaching Donald Trump actually mean for financial markets?


Stockmarkets were unfazed by the Clinton impeachment drama
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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.

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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.

Marina has a PhD in globalisation and the media from the London School of Economics, where she worked as a teaching assistant on the MSc Global Media. In 2014 she was invited to be a visiting scholar at Columbia University's sociology department in New York.

She has written for the Economists’ Intelligent Life magazine, the Financial Times, the Times Literary Supplement, and Standpoint magazine in the UK; the New York Observer in the US; and die Bild and Frankfurter Rundschau in Germany. She is trilingual and lives in London. She writes features and is the markets editor at MoneyWeek..