We have one of the longest bull markets in history. The market is going to crash - maybe not tomorrow, maybe not this year, maybe even not next year. When it does, we will point to a trigger. If it crashes while we talk about impeaching Trump, or actually impeaching Trump, we will say that was the trigger. If it crashes in October with no news at all from the world and everything at peace, we’d say “the market often overcorrects in the Fall, and with this long of a bull market, people are skittish.”
I think people are getting skittish. That it is happening while we have political scandal happening isn’t helping, but honestly right now, a new study on global warming or a terrorist attack in Paris could trigger it because people are skittish. Or people might be disciplined and hold tight. But anyone with enough money to invest significantly and everyone managing funds that can move the market significantly knows that bull markets don’t run forever.
Correlation is not causation in the market, although we will try to find a trigger when it does happen.
Here’s a chart of the last ten years of the Dow-Jones Industrial average:
The market had been dropping during the last year of the Bush administration and the first several months of the Obama administration. This is usually considered to be because of the end of the housing market bubble. The Dow-Jones was at 8,426.74 on May 4, 2009 (which was when the more or less steady rise began). I think that the really fast drop and rise in the first several months of 2009 should not be counted as part of the main trend. The Dow-Jones is now at 25,790.35. This is an increase of a little more than 12% a year from May 4, 2009 to August 24, 2018, going through all the rest of the Obama administration and the Trump administration so far. Trump didn’t really make that much difference. The Dow-Jones rose quickly just after his election but peaked in January of 2018 and is now somewhat lower.
Arguably, a 12% rise per year for a sustained period is too much. Over the history of the Dow-Jones (since 1896), the average growth has been something a little more than 5% a year. The times when the average growth has been larger than that for a sustained period are generally followed by significant drop. Most obviously, there was the nine-year period before the stock market crash in 1929, when the Dow-Jones grew something like 19% or 20% on average.
Since the beginning of June, when Trump’s trade belligerence has been one of the primary factors driving the non-US markets (in $ terms, based on broad market ETFs):
U.S. +6.4%
Europe -0.4%
Japan -2.9%
All EM -5.0%
China -11.3%
So non-US stocks have substantially underperformed, and perhaps reasonably so - U.S. domestic growth is strong, and it’s in a better position to weather a trade war. I think the most notable effect of a Trump impeachment might be a reversal of this recent trend, since the tariffs are closely associated with Trump personally.
Well, here’s the thing. Trump said the market would tank if he were impeached. He didn’t say anything about being removed from office. While there is a small, but finite chance that he gets impeached if the Dems take the House, there is a near zero percent chance that he is removed from office. So, impeachment means zip in terms of policy. Also, the event of impeachment isn’t going to be some surprise. There will be a long lead up to it, and whatever the market does, it will likely do it before the event. Buy the rumor, sell the news. Or, sell the rumor, buy the news.
People can we stop using “impeachment” when what we want to say is “conviction by the US Senate” and removal from office. Impeachment by the House is only a kind of “recommendation” to the Senate that they put the President on trail and to actually remove the president, SIXTY SEVEN Senators have to vote to convict. This is not going to happen and only would only stir up Trump’s base leading to the election of more Republicans and the re-election of Trump.
There’s always the possibility of a self-fulfilling prophecy. If Trump keeps saying that the market is going to crash if he is impeached, then, no matter how much reassurance we get from pundits, if he is, in fact, impeached, and enough people panic and start selling off stock, the market will dip. It will not crash like it did in 1929, and spur a decade-long Depression, but it could end the 9-year bull run. The businesses will still be there, the market will still be there, the shares will still be there, and it will recover, but it could be a drop history will remember.
I think Trump is very aware of this, and that’s why he is making a point of pushing this prediction to the forefront. He’d love it if he goes down, and takes everyone else with him. That’s exactly how egomaniac he is.
There is a meaningful distinction between highly improbable and “not going to happen.”
It is not going to happen for campaign finance violations covering up affairs and that like.
But it does depend on what other crimes and misdemeanors are uncovered and what he does to obstruct justice in the process.
Assume a narrow R Senate majority, say 61 to 59 or even 62 to 58 and the crimes/misdemeanors are more cogent to the public at large, say evidence of collusion within his campaign and minimally an effort to cover such up and obstruct at his direction. Enough that every D votes to convict. A large number of those 61 or 62 GOP Senators are not up for election again until nearly 4 or 6 years. Out of all the GOP Senators some really dislike Trump, and many know that 4 to 6 years to re-election is a very very long time. 8 or 9 voting to convict in such a hypothetical is not impossible. Again though, not based on a campaign finance conspiracy crime alone. Proof of actual cover-up that functioned to aid and abet Russian attempts at election interference at his direction though … that could do it.
To the op. In the immediate short term maybe up maybe down maybe up down up down … but the markets would see Pence as a predictable actor over the very moderate term and wold do whatever it was that it was going to do anyway.
And a President Pence would pardon Trump to move the country along.
If it ever comes down to it, we’re more likely to see a Nixon exit rather than an actual removal from office by the Senate.
I have no idea if we might see a different scenario prompting a resignation: Let’s say Mueller comes up with some serious shit, has a sit-down with Trump showing him said serious shit, and offers him immunity if he resigns. As much as I’d like to see something like that happen, it becomes less appealing to me as Mueller’s investigation drags on. If we’re really close to the election, then going public with the serious shit might be better in terms of Trump either not running or easily being defeated and then ending up in the slammer.
If there are federal tax evasion issues, I’d bet good money that there will also be NY state tax evasion issues as well. Pence isn’t going to be able to pardon him for charges of NY state tax evasion. In fact, doesn’t NYC have an income tax, too? So you have state and city charges on the line and out of the scope of a federal pardon.
Good point about the inability to pardon from state level offenses.
As for the Nixon compare contrast … Nixon was an intelligent, and, relatively, a rational person, who, in his own way, actually did care about the country, and even about how going down swinging would harm the country. Trump? My impression is that he defines winning as doing better than others (there is no "win-win"in his negotiation quiver) and that his last hand would be trying to hurt everyone else more than he is hurt so he can still spin a (relative) win. Hurting the country and the world biggly as he catered would be his goal. I do not see him reading the writing on the wall (which Mexico is paying for, right?) and resigning, no matter what Mueller hypothetically has.
Your numbers are suggesting there are 120 Senators, with 67 needed to convict. There are only 100 Senators (with 67 needed to convict) and with the current make up of 51 Republicans and 49 Democrats, 18 Republican Senators - not “8 or 9” - would have to vote to convict.
Trump has a current 88% approval rating with Republicans voters. Please tell me which SIXTEEN Republican Senators are going to vote for removing a Republican president from office?
Not going to happen no matter Mueller comes up with.
This gets said a lot, but I don’t think it has much empirical evidence behind it. Momentum and randomness play a much larger role. If “uncertainty” (such as an executive whose positions change almost by the hour) caused negative stock markets, we would have had a crash of epic proportions numerous times since November of 2016, but we haven’t.
Trump isn’t good for business. He’s almost exactly the opposite of what you’d look for in a good business leader - mercurial, untrustworthy, doesn’t pay his bills. Inasmuch as there was any effect at all (and I doubt there would be more than a day or two’s hiccup), it would likely be positive.
Still … certain crimes and misdemeanors proven would be odious enough that some may feel they since are screwed either way (lose a primary or lose a general or hope that four o more years is enough to move on to other issues that will decide their fates) that they may vote to convict anyway.
Yes 16 (or more) is a big lift. The bar for odious enough is very high.
Looking at 538’s Trump Scores and list by percent of time voting with Trump you get to having to have the likes of Cruz, Grassley, Ernst, Johnson, and Garner to vote to convict, and yeah, that would happen only if the crime was so blatant and treasonous as to have Trump’s base begin to leave him. Just murdering someone would not be enough.