How to Manage your Money when war breaks out

Trump’s Impeachment, and its Effect on Markets

We can reasonably assume from this point in December that our standing president will be impeached. But will impeachment have a positive or negative effect on markets? To find out we need to look at the history of Trump and how he affects the market.

When we look at the past to see what has moved markets the most over Trumps tenure, there is a marked pattern. Trade talks good = market up. Trade talks bad = market down. Outside of the change to corporate taxes and Fed influence on interest rate policies, the main focus for Wall Street has been where we are with Chinese trade negotiations.

The largest pullback of this 10+ year bull market began last December, when Trump announced additional tariffs to be added to Chinese imports. 13% was immediately slashed from the S&P index, with allusions to slower growth and increased prices. However, in the months since the drawdown, the S&P has rallied more than 25%, all while the president is riddled with impeachment proceedings.

What we can assume, is the effect on markets of an impeachment plus removal will equal market turmoil. Which will most likely result in a sharp pullback somewhere in the realm of 5-10%. This will of course be quelled once uncertainty evaporates with Pence assuming power. However, the most likely scenario, logically, will be impeachment plus no removal. In this case you can predict a small jump in the Dow, S&P and lesser the Nasdaq.

Senate needs a 2/3 majority (67%) vote to remove an impeached president, and it doesn’t currently like those votes exist.

Remember during times of political turmoil to avoid drawdowns by keeping position sizing in check, have your hedges in place, and look for continuances in leadership stocks to know when to get back into the action.

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