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Impeachment trump will blow up the markets

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One of the major political themes may be a possible impeachment of U.S. President Donald trump, who is accused of mixing personal and state interests, as well as in relations with Russia (because of the reluctance to disclose that trump allegedly fired the Director of the FBI). While politically this event certainly will again divide American society, predictions about the reaction of the markets differ. Some experts believe that the market is “used to” surprises, others believe that the departure of trump can bring down the system.

In the last two weeks possible impeachment of the President of the United States Donald trump is becoming a more frequent subject of discussion of political experts and economists. Trump is accused of attempting to influence the FBI investigation in relation to Michael Flynn, who for some time worked as the adviser on national security Affairs in the presidential administration.

Flynn resigned in mid-February because of the scandal associated with calls to the Russian Ambassador Sergey Kislyak (Flynn had no authority for such negotiations). In may, trump has sacked the head of the FBI James Komi — according to official information, due to the mismatch between positions, but the President’s opponents attribute this exactly with the case of Flynn and cooperation with Russia, says Marketwatch.

While the probability of impeachment is assessed as rather low: in the entire history of the United States Congress initiated only 62 proceedings of impeachment against public officials, considered were only 19 of them and only eight Federal officials were indeed dismissed.

Only two presidents — Andrew Johnson in 1868 and bill Clinton in 1999 — was impeached and both were acquitted.

The procedure itself is quite complex and ultimately requires the consent of two thirds of the members of the U.S. Senate (now controlled by the Republican party, whose member and President of the trump).

However, the beginning of procedure of impeachment now does not seem impossible: resolution on the need for it was signed by the members of municipalities for ten U.S. cities: Amherst, Brookline, Cambridge, Leverett, Pelham (Massachusetts), Alameda, Berkeley, Los Angeles (CA), Richmond (Virginia) and Chicago (Il). A number of other cities are also considering the decision to send similar requests to the representative in Congress, reports Politico. In almost all these cities trump the election lost to Hillary Clinton, so their initiative is not surprising.

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If Congress does decide to go the way of impeachment, it will put the country in a precarious position. Professor of constitutional law at Harvard law school and a former adviser to President Barack Obama, Lawrence Tribe says that the millions of voters who supported trump, will see in this decision “an attempt by Democrats to nullify the election results”, which will create the tense political situation in the country.

The US stock market “presupposes” that a President Donald trump would be subjected to impeachment, and traders have become increasingly worried about political scandals involving trump, said Boris Schlossberg, managing Director of foreign exchange strategy for BK Asset Management. Waiting for the impeachment Schlossberg explains the “muted reaction” of the markets on the news about the dismissal of the Director of the FBI. The former CEO of General Electric Jack Welch stated that the impeachment trump “blow up the market, not leaving stone upon stone.”

But now investors are getting rid of assets, fearing chaos because of possible impeachment.

“The problem with trump, it seems, are like waves. Now is the time for the next wave,” says Hans Peterson, head of asset allocation at SEB Investments. According to Peterson, institutional customers remain cautious and ask him questions about the likelihood of impeachment in the near future. Some forecasters believe that in the short term, the impeachment trump can lead to a drop in the markets by 5-10%, says CBS News.

“This is causing concern among investors, because it casts doubt on the actual conduct of policy by the President and his team. For me, the process of decision-making trump looks almost accidental,” writes Etienne Parisi, economic analyst Newsmax Finance.

According to Parisi, one of the main issues for financial markets and long-term investors is how to cope with the uncertainties of political decisions. “As the broker can prepare the investor for the background of this uncertainty? What happens if and when the next political decision will cause another shock?” explains Parisi.

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But there are other opinions. “Overall, the market seems to be immune to what is happening in Washington. I think mostly speculators interested in potential changes in the tax system,” says Art Hogan, chief analyst at Wunderlich Securities. A former adviser of Ronald Reagan Larry Kudlow calls impatient investors “just to give Trump the opportunity to fully implement their strategies” to reform health care, stimulate economic growth and reform of the tax system.

“In the end, trump has been in power for a relatively short time, and he inherited a mountain of problems. Now he’s trying to fix something that has not been touched for the last 20 years,” said Kudlow.

Sam Stovall, chief investment strategist at research firm CFRA believes that the market damage will be moderate. “This time [in contrast to the case of Clinton] the echo of the crisis could cause a correction, but it is unlikely to lead to recession and hence, will not cause the return of the market, with a declining trend,” writes Stovall. He drew attention to the fact that now the ratio of market value of shares profit on it for companies in the S&P 500 is nearly 24, whereas historically the average for the index is 15. Thus, even if the market is reduced, performance is still not low.

In addition, some experts point out that in the case of the impeachment of the President will be the current Vice-President Michael Penny, who is called “the anti-trump,” is an experienced, beloved by many a politician, a supporter of free trade and advocate of business interests.

The presidency of Pensions will be characterized by “less drama”. It is considered more conservative politician who can stabilize the situation and reduce the uncertainty that is bothering the market participants.

“I think the markets would respond positively to the prospect of the presidency Mike Pence. In the White house, Pence is more popular than the trump. Actually, I think Pence will have a better chance to realize the plans of the current President than the trump,” writes Greg Valliere, chief strategist at Horizon Investments.

 

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