It’s too early to say whether or not President Trump will face impeachment charges anytime soon – if ever.
PredictIt, an online prediction site, pegs the odds of President Trump undergoing impeachment proceedings by the end of 2018 at only seven percent. As events roll out, those numbers could easily rise, but there’s no indication that impeachment is imminent right now.
That said, the best investor is a prepared one, so it’s worth evaluating the impact of a Trump impeachment on the economy, stock market and bond market. After all, there’s a lot at stake for Americans, regardless of political affiliation.
Mitchell O. Goldberg, president of ClientFirst Strategy, Inc., in Melville, N.Y. said, “Suffice it to say that if you're within five years ahead or past your retirement date, you have to be asking yourself how a presidential impeachment could impact you,” he said. “If you’re 10 or more years ahead of your hoped-for retirement, you should evaluate investing new money into your investment accounts, or at least estimating if you should do anything differently.”
Previous Presidential Impeachments
President Trump says the stock market would “crash” if he were impeached and that “everyone would be poor.” Few are echoing those sentiments, but there is some historical evidence that the potential removal of a president does create ripples in the stock market.
Back in 1998, When President Clinton was impeached on charges of obstruction of justice and perjury, the S&P 500 slid almost 20 percent before the special prosecutor’s report on impeachment was released.
Yet, stocks quickly resumed their upward climb to new highs after President Clinton was acquitted by the U.S. Senate in early 1999. It’s worth noting that the U.S. economy hummed along the entire time, with gross domestic product growth up 4.5 percent in 1998 and up 4.8 percent in 1999.
Additionally, while the resignation of President Nixon in 1974 led to a 14 percent decline in overall stock prices in a one-month period that was not too surprising since a bear market was already well underway. Additionally, global oil prices, unrest in Russia and the Middle East, and record-high U.S. inflation also fed the market bear.
So far, the Trump scenario mirrors the Clinton impeachment more so than the Nixon resignation. The U.S. economy is robust, the stock market is cresting new highs, and consumer sentiment is at record levels right now, echoing the bullish economic climate of 1998.
Could that climate recede if impeachment proceedings against Trump emerge? Likely not, financial experts said.
Mike Molitoris, managing director with Flagship Wealth Management Group, in Cary, N.C., believes the actual impact on the markets will be much less than the President has described.
“If Donald Trump were to be impeached its impact on the markets will be minor,” said
Molitoris bases that view on three key factors:
- The President can't do anything without Congress (i.e. tax reform). “Congress is where the power lies, not the presidency,” Molitoris said.
- An impeachment reestablishes faith in the checks and balances of government. “Essentially, our system works,” he said.
- The consumer is optimistic and healthy right now.
“As some have suggested, it may even lead to a relief rally,” Molitoris said. “At the end of the day the President has overvalued his significance to the markets growth. I fear a more realistic negative impact to the markets will be if Congress changes hands in November.”
Another school of thought suggests the Dow’s massive upward climb is ready to recede anyway, and that investors will act accordingly, shrug their shoulders and move on.
“One possible message from the market is that investors believe they've gotten out of President Trump's economic policies as much as they're going to get,” said Goldberg. “With the major stock market averages hitting new highs of late, in the face of an acceleration in the Trump related investigations and legal matters, that certainly seems plausible at the moment.”
Other market observers agree that Trump impeachment proceedings won’t stop market progress, at least in and of itself.
Morris Armstrong, owner of Armstrong Financial Strategies, a fee-only registered investment advisory firm in Cheshire, Conn. doesn’t see the markets reacting to a hypothetical impeachment.
“It’s likely that the markets would be non-reactive, or at most, a modest pullback,” he said.
A bigger issue could be a Democratic majority in the house, which is much more likely to trigger impeachment proceedings. “But you would still need 67 votes in the Senate to convict and that is unlikely,” Morris said.
Economically, the U.S. seems to be doing well under the current administration, but if economic difficulties come, it could spell trouble in the election booth.
“When Bill Clinton was impeached the markets did not suffer and I wouldn’t expect them to suffer here,” Morris said. “This rally in the market, is more than just Trump, but is the culmination of better tax policies, more confidence by consumers and a fairly good global economy.”
Brian O'Connell is a former Wall Street bond trader, and author of the best-selling books, The 401k Millionaire and CNBC's Guide to Creating Wealth. He's a regular contributor to major media business platforms. Brian may be contacted at firstname.lastname@example.org.
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