Thursday, January 21, 2021

What a second Trump impeachment could mean for the stock market

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This is the second round. President Trump may be on the on the verge of a second indictment barely nine days before he left office. But investors are not staggered.

“Long story short, I don’t think that means anything for stocks. I don’t really think investors care just because Trump’s tenure is over in nine days, ”said Lindsey Bell, chief investment strategist at Ally Invest. Fortune. “They’re really thinking about what a Biden administration means for which sectors and industries?”

Stocks fell early Monday with the S&P 500 down more than 0.7%, while the Dow fell around 0.5% early in trading, before recovering somewhat in the midday session. Market movements preceded the House introduces an impeachment article on Monday as Republicans blocked a House resolution calling on Vice President Mike Pence to invoke the 25th Amendment to quickly remove Trump from office. But for one, Wells fargo The Investment Institute’s senior global market strategist Sameer Samana argues Monday’s moves are likely due to other factors (he says COVID-19 cases are raging, vaccine rollout is slow and that rates start to rise again).

Some strategists claim that like the last time Trump was impeached in 2019 (when the markets have largely not smiled), the stock market reaction would be stifled or even non-existent: “Do not take anything away from its political importance. It’s a slim chance, but unless it stops the Democrats from passing another stimulus bill, it’s the only implication we can think of, ”says Samana of Wells Fargo. Fortune.

“Beyond that, the impeachment in the final days of President Trump will not impact the markets one way or another,” Samana adds.

That said, some on the street are pointing to a few long-term implications that could cause investors to keep an eye on the impeachment proceedings.

The stimulus continues to be a priority, and Wells Fargo’s Samana notes that investors may care more about impeachment “if it takes Congress’s eyes off the ball, so to speak, in terms of the stimulus.” (Samana and Bell still believe more stimulus will be coming soon.)

Meanwhile, UBS chief economist Paul Donovan notes that a “successful impeachment could prevent US President Trump from stepping down in the future, [and] whether investors think US President Trump has a political future that might matter, ”he wrote in a Monday note, although Bell considers it“ too far away for investors to think ”. In addition, Wells Fargo’s Samana, UBS’s Donovan and Ally’s Bell note that impeachment could sharpen the already wide divide between Republicans and Democrats – “making the legislation harder to pass,” Donovan notes. It could actually benefit the markets, suggests Bell, as a divided Congress is historically favored by the street.

And while he says the impeachment process is unlikely to have any real impact on the markets this week, Samana notes that there could be longer-term implications for the midterm elections in 2022. “To the extent that the impeachment process is seen as, let’s say, overly partisan, it might discourage some voters,” he suggests.

Ultimately, Samana adds: “We would see it as short-term noise alongside anything COVID-related.”

More to read absolutely financial cover of Fortune:

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