Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Two Ways Impeachment Could Hurt Equity And Risk Markets

Courtesy of ZeroHedge View original post here.

Authored by Bilal Hafeez via MacroHive.com,

It’s official. Speaker Nancy Pelosi has formally announced an investigation of President Trump. This is in response to conversations the US president held with the Ukrainian president, Volodymyr Zelensky, in which Trump allegedly pushed for the investigation of the son of Democrat Presidential nominee Joe Biden.  A simple majority in the Democrat-held House of Representatives would be needed to impeach Trump. It would then go to the Senate for a trial, where a two-thirds vote would be needed to convict.

Infographic: What an Impeachment Would Look Like | Statista

You will find more infographics at Statista

Given that the Senate is Republican-held, however, it would be unlikely that Trump would be convicted – Bill Clinton was similarly impeached without conviction in the 1990s.

Given this low probability of conviction, the question is whether or not the impeachment process will impact markets. We think there are two ways it could:

1. It increases political and economic uncertainty. 

Markets have been affected by the up-and-downs of the trade war drama with China. The uncertainty this has engendered has seen a stronger dollar, weaker stocks, and lower rates. With the odds of impeachment on the rise, we’ve also seen a concomitant rise in policy uncertainty too (see Chart 1).

Yesterday, the day of the Pelosi’s announcement saw weaker stocks and lower rates. Depending on to what extent the impeachment hearings lead to more erratic behaviour by the President or distract him from current geopolitical issues like Saudi-Iran, we could see uncertainty continue to rise. This would support the dollar and be negative for risk markets.

2. Democrat Presidential nominee Warren’s odds of winning the primary could rise. 

One of the ironies of the impeachment process is that it could attract negative publicity around Joe Biden. The fact that Biden’s son was on the board of a Ukrainian gas company in itself could draw criticism from the public. If Biden supporters look elsewhere then the question is whether they turn to another moderate candidate or go more progressive. If the latter, that might well favour Elizabeth Warren who has made impressive gains in recent months. (see Chart 2).

Equity markets are likely to view a left-leaning candidate unfavourably. So at the margin, the declining support for Biden could be seen as risk negative.

We’re still at the very early stages of the impeachment process, so much could change in the coming weeks. Considering the potential damage to risk markets, though, we’d maintain a defensive position in markets.

 


Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!





You must be logged in to make a comment.
You can sign up for a membership or get a FREE Daily News membership or log in

Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!