Trump’s Impeachment: What Will It Cost Wall Street?

On Tuesday, Nancy Pelosi ordered a formal investigation into President Trump’s impeachment. Pelosi is the speaker of the House of Representatives. There are allegations that President Trump influenced the Ukraine government to investigate a criminal case against Hunter Biden—the son of former Vice President Joe Biden. Notably, Joe Biden is a potential Democratic candidate for the 2020 presidential election. If the allegations are true, President Trump’s impeachment might not be avoidable. Democrats have a majority in the House of Representatives, which holds the sole power to impeach the president. President Trump might be the third US president to be impeached—including President Bill Clinton and President Andrew Johnson. 

Trump’s Impeachment: What Will It Cost Wall Street?

However, President Trump probably won’t be removed from office. Republicans have a majority in the Senate where the impeachment trial would take place. President Trump’s impeachment could increase the nervousness about the US leadership.

Good news for China?

The formal investigation will impact the US-China trade talks next month. President Trump has stronger views against Chinese trade practices. He blacklisted Huawei due to national security. If there’s the slightest chance that President Trump might be removed from office, China might wait and try its luck with the next US president. The impeachment trial might disqualify President Trump from a second term.

Trump’s impeachment and Wall Street

From Wall Street’s perspective, the timing of the investigation might be wrong. The US and China have been locked in a trade war without a resolution since 2018. On Monday, the S&P 500 Index (SPY) and the Nasdaq-100 Index (QQQ) fell 0.8% and 1.4%, respectively, after the impeachment talks. Notably, the tech-heavy QQQ fell almost twice as much as SPY. Investors in tech stocks are waiting for a partial or complete resolution to trade disputes. Microsoft (MSFT) and Apple (AAPL) account for around 22% of QQQ. Microsoft and Apple’s stock prices fell 1.4% and 0.5%, respectively.

In September, the equity market recovered August’s losses in the hope of a trade deal and the rate cut. However, Fed Chair Jerome Powell hinted at fewer rate cuts than Wall Street anticipated. The investigation into President Trump’s impeachment and Democrats backing the Hong Kong Human Rights and Democracy Act of 2019 might jeopardize the trade talks. Also, the fight between Democrats and President Trump could delay the United States–Mexico–Canada Agreement. The bill is important for Wall Street.

A longer period of uncertainty will impact the US, China, and the whole global economy. On Monday, in an interview with CNBC, Christine Lagarde, the ECB’s next president, said, “I think the threat against trade at the moment is the biggest hurdle for the global economy.” She also said, “The longer this lingers, the more uncertainty sinks in.”

Assets to watch in October

With the inquiry into President Trump’s impeachment, it might be the right time to accumulate gold. UBS, Mark Mobius, and Citigroup advised for higher upside in gold prices. Some experts think that gold will reach $2,000 per ounce—a potential upside of 30% from the last closing level. On a year-to-date basis, gold prices have risen 19.9%. Bitcoin might also rise next month. In September, bitcoin has fallen 10.9%. So far in 2019, bitcoin rose 125% and outperformed SPY by 106.7 percentage points.