Impeachment proceedings start in earnest next week, when the House of Representatives will hold its first public hearings into misdeeds by President Trump. This is something that doesn’t happen very often.
Markets have been shrugging off the impeachment inquiry into Trump’s likely abuse of power in dealings with Ukraine, which included an effort to incriminate Joe Biden’s son Hunter for his role on the board of a Ukrainian gas company. But impeachment will soon reach a new level of intensity, making it hard for anybody to ignore.
There’s ample evidence Trump withheld aid to Ukraine, which Congress appropriated, while prompting that nation’s leaders to publicly charge Joe Biden with corruption. There’s no evidence Biden committed a crime, though Hunter Biden probably did cash in on the family name by accepting a lucrative job he wouldn’t have gotten otherwise. Trump has been trying to turn up dirt on Biden, to weaken his standing as a presidential candidate. The aid was to be a payoff for Ukraine doing Trump’s dirty deeds.
Impeachment proceedings don’t directly affect markets or the economy, but they’re not favorable for the market, either. In its regular recession outlook, Moody’s Analytics raised the role impeachment could play in triggering a possible downturn. “The possibility of an impeachment of President Trump… could cause businesses to become even more cautious in their investment and hiring,” Moody’s Analytics said in its report. “The uncertainty and the resulting pall over the economy will become larger as the presidential election approaches.”
Even if the economic effects are small, the impeachment of a U.S. president is a notable bummer. It reflects serious behavioral problems in the White House and a giant distraction from real problems the nation ought to be addressing. For those reasons, this week’s Trump-o-meter reads FAILING, the second-lowest rating.
The odds seem high that the House will impeach Trump by the end of this year or early next year, sending the matter to the Senate for a trial. It would take 20 Republican senators voting against Trump, plus all the Democrats, to actually remove him, which is unlikely. But it’s not impossible, since some Republicans in Congress privately loathe Trump.
The S&P 500 stock index rose 27% in the weeks following the start of the Bill Clinton impeachment in 1998. But this is not the late 1990s. Stocks back then were in the middle of a roaring rally fueled by the dot-com boom, which still had two years to run. Stocks seem more tired now, in the 11th year of a marathon rally. Corporate profits and economic fundamentals are dipping and stock valuations are the highest in 22 months, according to Bank of America Merrill Lynch. The upshot is that stocks and other assets may be more sensitive to externalities such as impeachment.
There could be silver linings. Trump may feel more eager to land a trade deal with China as impeachment talks get underway, to divert attention away from damaging witness testimony. Markets would appreciate that. But Trump has also said he won’t negotiate any legislative matters with Democrats while impeachment is underway, which could lead to another government shutdown soon. And Congress could further delay ratification of the new trade deal with Canada and Mexico. Impeachment is likely to be lousy, no matter what side you’re on.
Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. Confidential tip line: firstname.lastname@example.org. Encrypted communication available. Click here to get Rick’s stories by email.