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How, When Impeachment Would Move the Market (and Help the Market)

Video Credit: The Street - Duration: 01:46s - Published
How, When Impeachment Would Move the Market (and Help the Market)

How, When Impeachment Would Move the Market (and Help the Market)

Sure, an impeachment could be a lift for the stock market.

But let's explore all the intricacies.

Positive Side for the Market "Betting markets have been pricing in plummeting probabilities of passage for the new USMCA agreement (or NAFTA 2.0, as some call it)," wrote Chief Investment Officer of Private Wealth at Glenmede, Jason Pride, referring to futures markets betting on political and economic outcomes.

And one can imagine, as some have, that a new president may want to immediately reach a trade agreement with the Chinese government.

Wiping existing and scheduled tariffs off the table would be a considerable boost to the economy.

This may lessen the case for several interest rate cuts, but would likely be net positive for stocks.

But here's the point: The Reality "Impeachment efforts are unlikely to have clear, direct implications for markets at this time," Pride said, as new economic policies and outcomes are completely unknown at present, as the country is not close to seeing a new president and a new economic regime.

Upon news of the impeachment, Jamie Cox, managing partner for Harris Financial Group, wrote in emailed remarks to TheStreet: "Markets are way more interested in a trade deal with China." LPL Financial Senior Market Strategist Ryan Detrick said, "As long as the economy remains firm, we don't think the drama out of Washington will impact the staying power of this bull market." Pride pointed out that much of Trump's administration has been centered on economic issues.

His policies have had their impact on the market, as constrained trade relations with China and lower corporate and individual taxes have their push and pull on stocks.

"As a result, the market's reaction to impeachment could begin to reflect an increased likelihood of a political shift to an alternative paradigm as things begin to unfold," Pride said.

And that's the point.

Here are the issues the market will weigh, as the next four years of the White House see either a new administration or the same one.

The Issues Priced into every stock in the U.S. is a lower corporate tax rate, as Trump lowered that rate largely to 21% from 35%.

A Democratic president like Bernie Sanders (D-VT) or Elizabeth Warren (D-MA) would likely raise individual taxes, and possibly corporations'.

That's a drag on the market.

But would they or other potential president-elect's -- whether Democratic or Republican -- also want a comprehensive trade deal with China?

That would be a lift to the market, even if it means fewer interest rate cuts.

A far left-wing Democrat may also want to crack down on big tech, under the framework of American anti-trust boundaries.

Warren and Sanders have also voiced what they see as a need to break up large banks into smaller pieces, a tough undertaking on many levels.

Healthcare policy is also in question, where tougher policies on insurers would be a drag on those stocks.

In time, the market will sort out what it believes to be the net effect of whatever Jackson Pollack mix of outcomes come to fruition.

For the time being, Wall Street has made it clear it's not overly concerned about impeachment at present.

The S&P 500 has gained 0.23% since Sept.

25, when the impeachment news broke.


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