What would happen to trading in the UK and shares on the London Stock Exchange if President Donald Trump was impeached? There’s a 60% chance he’ll be impeached – odds of 4-6 according to Paddy Power Betfair.
The accusations against Trump are many:
- The alleged Russian ties and their influence on the US election result in November
- The crass tweets
- The Charlottesville, Virginia, white supremacist rally weekend that turned bloody (and was fatal for counter-protestor Heather Heyer), followed by Trump’s softball response
But the bottom line is that there must be solid evidence of misconduct for an impeachment. An impeachment process would have other hurdles, including that a member of the Republican-controlled House of Representatives called for an impeachment resolution.
Impeachment – what chance?
Jonathan Roy, advisory investment manager at London-based Charles Hanover Investments, thinks there’s a slim chance of impeachment, or it affecting trading in the UK.
“But it changes. You get these spikes. But what you see happening to Trump is on the scale of the Bill Clinton ramifications,” he says. Roy makes the point that though Mike Pence appears a far more stable personality, the big Trump infrastructure, tax and deregulation promises – and they are mostly promises after eight months into his term – “would only happen under Trump”.
Laith Khalaf, senior analyst at asset manager Hargreaves Lansdown, says an impeachment would be a ‘negative’ for markets because of the political hand-wringing. Trading in the UK would be bound up in that.
“This would probably particularly be the case for Donald Trump whose presidency has seen a rise in share prices on expectations of a spending splurge and business-friendly government policy.”
He goes on: “History tells us that politics can cause temporary shock waves in the market, but in the long term economic fundamentals assert themselves.”
Shades of Kristallnacht – Congressman Cohen
US Memphis Democrat Steve Cohen says he will file articles of impeachment against Trump. “When I watched the videos from the protests in Charlottesville, it reminded me of the videos I’ve seen of Kristallnacht in 1938 in Nazi Germany.”
He went on: “It appeared that the Charlottesville protesters were chanting ‘Jews will not replace us’ and ‘blood and soil’, an infamous Nazi slogan, as they marched with torches that conjured up images of Klan rallies. None of the marchers spewing such verbiage could be considered ‘very fine people’ as the President suggested.”
Others, including members of the financial community, have queued up to take aim. Despite all the pro-business talk, Trump’s behaviour is more akin to promoting “white nationalism” rather than supporting economic growth, Roger McNamee from venture capital firm Elevation Partners said recently.
"He [Trump] has pretended like he's contributed a lot to job growth when, in fact, he has not," McNamee told CNBC’s Squawk Box. "I think he threatens a lot of people. I don't see how any of that is pro-business at all.”
Impeachment is priced in
Back in mid-May, just four months into Trump’s term, Boris Schlossberg, foreign exchange managing director of BK Asset Management, told CNBC that the US stock market already assumed Trump would be impeached.
“If you have President Pence and a Republican Congress, you have a much better chance for a very capital-friendly agenda of tax reform and fiscal spend,” he said.
Certainly, there would be shock on the day of an impeachment verdict. But trading and stock market valuations would rapidly return to fundamentals, Jon Horton of Chamberlain de Broe financial advisers told Capital. “It would not turn into a collapse. One suspects that the markets would stabilise.”
Needed: a clean quit?
Markets are adept at getting on with their own priorities, despite background noise and lack of policy focus. But some direction of travel is needed. “If he goes,” says Horton, “go cleanly and let a more stable pair of hands steer the ship.”
Some of the investment community is wary of urging an all-out resignation. Capital put in several calls to major London-based asset management groups for a view on the issue and its impact on trading in the UK. Most declined to talk.
However, other Trump scenarios are emerging. The Donald could jump before he’s pushed, and the odds are shortening. “After an awful week for the president that has seen other issues like North Korea pushed into the shadows, it’s no surprise punters are latching onto the fact Trump might call it a day,” Paddy Power declared in mid-August.
A non-Trump tweet followed, 16 August: “The circle is closing at blinding speed. Trump is going to resign and declare victory before Mueller [former FBI director leading the Russian election probe] and congress leave him no choice.”
The author was Tony Schwartz who helped Trump co-write his memoir Art of the Deal, published in 1987. “Trump's presidency,” Schwartz tweeted again, two hours later, “is effectively over. Would be amazed if he survives till end of the year. More likely resigns by fall, if not sooner.”
There’s lots of talk, then, about ‘snowballing’, ‘a tide turning’, and ‘the last days of Nixon’. Yet Donald Trump is a battle-hardened survivor. And despite much shrill talk there is no smoking gun – yet – on the biggest issue of all: incontrovertible evidence of Russian collusion over the 8 November 2016 election victory.
Box-out 1: Trading a Trump Future
- Trump is increasingly looking stuck, a view underlined by the recent firing of Steve Bannon, the driving force behind much of Donald Trump’s anti-establishment campaign rhetoric
- Trump’s lack of momentum means dollar weakness – little infrastructure progress is bad for economic confidence. Protectionist trade talk has also dented the greenback
- Watch for Republican moves to pile pressure on Trump to quit. A Pence swearing in would provide stability and, very likely, a solid floor for a sustained dollar recovery
- Federal Reserve chairman Janet Yellen looks likely to quit at the end of January 2018. There is however no sign, yet, of a successor for the head of the US central bank. Another blow for dollar confidence
US presidents who were impeached
Bill Clinton was impeached in December 1998. The grounds were perjury – lying under oath about his relationship with White House intern Monica Lewinsky. Clinton, eventually, was acquitted.
Richard Nixon was impeached in July 1974, including for the obstruction of justice. But Nixon resigned the next month to avoid any hearing. Vice-president Gerald Ford became president and pardoned Nixon of any wrongdoing.
Andrew Johnson faced impeachment proceedings in 1868. The accusation was violating the Tenure of Office Act. Johnson was accused of replacing Secretary of War Edwin McMasters Stanton with Lorenzo Thomas. Johnson was acquitted also.