What Would A Trump Impeachment Mean For Stocks?

From Martin D. Weiss, Ph.D.: Russiagate is casting a long, dark shadow over Washington.

It is darkening prospects for health care reform, tax reform, and the president’s $1 trillion plan for infrastructure … weakening the president’s hand in trade negotiations … dimming hopes for better relations with Russia … and raising some urgent questions for investors:

Could Donald Trump become the fourth U.S. president to face the real possibility of impeachment?

Will this crisis cast a similar shadow over Wall Street?

If so, will the Trump stock market rally come to a premature end? What about the bond market?

Ghosts of the Past

After the Civil War, President Andrew Johnson was impeached by a Congress unhappy with his vetoes of legislation to protect the rights of former slaves. Like today, the nation was suffering from the most extreme partisanship in its history. And he was ultimately acquitted in the Senate by just one vote.

President Richard Nixon faced imminent impeachment over the Watergate break-in and subsequent cover-up. Like today, a primary concern of Congress was interference with democratic elections. But, to avoid impeachment, he resigned from office.

President Bill Clinton was impeached on charges of perjury and obstruction of justice in relation to his affair with White House intern Monica Lewinsky. And like Johnson, he was acquitted in the Senate.

Will Donald Trump also be impeached?

You’d think the answer would depend entirely on the specific merits of any case against him. But the Constitution’s definition of “impeachable offenses” is so broad, it hands Congress a rich menu of choices to pick from.

According to Article II, Section 4 of the Constitution, the president “shall be removed from office on impeachment for, and conviction of, treason, bribery, or other high crimes and misdemeanors.”

Even if proven, would collusion with the Russian government to interfere with the U.S. election be considered “treason”? Or is that a stretch too far?

What about “high crimes and misdemeanors”? What assortment of behaviors might this soup-to-nuts category include? According to constitutional lawyers, it is not limited to actions that break the law. It can also include two other vague categories — abuses of power and violations of public trust.

“Well, then,” you say, “if we can’t find clarity in the Constitution, can we at least get some guidance from past impeachments?”

Some, but not much. In the three cases I mentioned above — Johnson, Nixon and Clinton — Congress issued or drafted articles of impeachment that covered a very wide range of behaviors, including

  • exceeding the constitutional bounds of the powers of the office …
  • behavior grossly incompatible with the proper function and purpose of the office, plus …
  • employing the power of the office for an improper purpose or for personal gain.

What do they mean by “exceeding,” “grossly incompatible,” or “improper purpose”? Not clear.

So “an impeachable offense” is exactly WHAT? The only simple answer was provided by Gerald Ford in 1970, when he was still in the House of Representatives:

An impeachable offense can be “whatever a majority of the House of Representatives considers it to be at a given moment in history.”

In other words, impeachment is, first and foremost, a political phenomenon. The proceedings come with all the trappings of a court trial, except, that is, the most important one: The last thing anyone would possibly say about the “judge and jury” is that they’re impartial.

So if you’re wondering what the chances are that Trump might actually be impeached, the first questions you need to ask are also purely political:

Does the opposition party have enough votes in the House to impeach? Right now, no. Come January 2019, maybe. But long before then, you need to also ask …

Does the president have the full support of his own party? For health care reform and infrastructure development? No. To block impeachment, yes for now; later, uncertain.

Does the president have strong public support? Among Republicans, absolutely. Among Democrats, absolutely not.

Is the president launching into a new war? If so, could it discourage Democrats from launching a new political war in Congress? In the wake of President Trump’s air strikes against Syria, the answer right now is a possible “yes.”

Bottom line …

Whether you blame it on anti-Trump forces, on Trump himself, or on some combination of both, you cannot deny that …

  • Impeachment is possible. It has already happened three times in U.S. history, two of which occurred under some circumstances reminiscent of today’s.
  • Despite Syria, the chances of impeachment are rising. We have investigations by the FBI and the Senate moving forward full speed … House investigation stalled momentarily by partisan bickering but now back on track … establishment media shouting “scandal” every day and from every mountain top … and probably more of the same to come.
  • The consequences of impeachment, or even just talk of impeachment, could be far-reaching. Specifically …

Washington is already under a cloud. As I said at the outset, Russiagate is casting a shadow over nearly everything the president and Congress do or propose to do, including foreign relations, trade policy, health care, tax reform, infrastructure, and more.

Stock investors are happy (for now). They like the strength in the economy. They like the fact that corporate profits have not been directly impacted, yet. And they’re glad Russiagate has not gotten in the way of White House initiatives to lift regulatory burdens on business. However …

Bond investors have big reasons to be concerned. Regardless of political persuasion, leaders under siege and with waning public support often resort to overborrowing, overspending and binging with money printing.

Until recently, they were able to get away with it thanks to deflation. But if inflation returns, they will lose that cover. Throw in falling global confidence in the U.S. government, and over the long term, you’ve got double trouble for bonds, especially government bonds.

The SPDR S&P 500 ETF Trust (NYSE:SPY) rose $0.2 (+0.09%) in premarket trading Monday. Year-to-date, the largest ETF tied to the S&P 500 index has gained 5.22%.

SPY currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 108 ETFs in the Large Cap Blend ETFs category.


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