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Why the stock market remains unfazed as Trump sees historic second indictment

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As a second unprecedented indictment of President Donald Trump unfolded in Congress on Wednesday, market participants were mostly unfazed but aware of the historic moment in US politics.

The riots resulted in the deaths of five people and raised questions in the United States and around the world about the integrity of American democracy and a smooth transfer of presidential power. The Wall Street Journal reported that it was the fastest impeachment vote in the history of nations.

House Democrats led by Nancy Pelosi, the Speaker of the House, specifically accused Trump of deliberately making statements which, in context, encouraged and predictable resulted in flawless action on Capitol Hill, such as: if you don’t fight like hell, you’re not going to have a country anymore. .

Ten GOP members, Trumps’ own party, joined the House vote.

No impeachment so far has resulted in a Senate conviction and the removal of a president from office in US history. However, forcing Trump out of office may not be the most important goal.

Trump has indicated he could run for president again in 2024, a prospect that many Democrats fear and a growing number of Republicans would also like to avoid. If Trump is found guilty by the required two-thirds supermajority in the Senate, the upper house could also vote to disqualify him from his future federal term, which would only take a simple majority.

However, market participants continue to express the view that impeachment trumps impeachment, or even a Senate conviction, are not market-moving events, unless it affects capacity. of Congress to focus on measures to help the economy emerge from the worst pandemic in a century.

Lily: House dismisses President Trump for second time in landmark vote

Before voting ended, the stock market ended largely higher on Wednesday, with the Dow Jones Industrial Average DJIA,
-0.03%
barely negative finish and the S&P 500 SPX,
+ 0.23%
and Nasdaq Composite COMP,
+ 0.43%
index ending in positive territory.

Futures on stock indices for the Nasdaq, the Dow and the S&P 500 NQ00,
-0.13%

YM00,
+ 0.39%

ES00,
+ 0.26%
appeared unfazed as the vote appeared to fall in favor of impeachment.

Market participants fear that Bidens’ legislative agenda will be anticipated by impeachment after what has been a steady rise for stock markets to record levels this month, backed by support from the Federal Reserve and billions in US government tax assistance dollars in the past year.

Impeachment is obviously not a good thing for the country with a president, JJ Kinahan, chief market strategist for TD Ameritrade said in an interview with MarketWatch on Wednesday. But I also think that the market balances what [impeachment] means with the arrival of the new administration and the hopes of a new revival.

Biden said on Monday he had asked if the Senate could fork its schedule so that impeachment and its agenda can be dealt with simultaneously.

Can we spend half a day on impeachment and half a day on appointing and confirming my people in the Senate? Biden said upon receiving his second dose of the coronavirus vaccine.

The new Senate Majority Leader Chuck Schumer, a Democrat from New York, said in an interview released Monday that it was possible to work on both issues at the same time. We had to do multiple things at once, but we also had to shift the agenda, he told the Buffalo News. Yes, we have to do both.

Lily: Why the stock market rallied even as a violent mob stormed the Capitol

The impeachment in the House sets up a Senate trial, which would be historic because compared to Trump’s last impeachment on December 19, 2019, there is growing belief that there may be enough movement among the Republicans to condemn the president of the upper house. .

However, the president would likely step down when Biden is sworn in on January 20 before the trial begins, according to reports.

Some have said the distraction from impeachment and a possible Senate trial will come at a time when the focus needs to be on distributing COVID vaccines and sustaining the economic recovery from the pandemic.

That said, some investors say they hope Biden can move his plans forward and believe Trump’s chapter will end in a week, regardless of impeachment.

As the building blocks of the Biden administration are well understood by the market at this point, politics is unlikely to take center stage just yet, at least as far as the market is concerned Chris Larkin, Managing Director, Product E-TRADE Financial trading and investing company told MarketWatch via email.

Keep in mind, heading into the results season where expectations are high. Companies have proven that they can generate revenue and growth with lower cost structures due to low borrowing costs, working remotely, and traveling less, so traders are likely watching the numbers more more than what’s happening in Washington, he said.

The stock market only cares about the direction of the economy, earnings, interest rates and Fed stocks, said Peter Boockvar, chief investment officer at Bleakley Advisory Group, in comments sent via email. at MarketWatch.

The last two indictments where the market reaction can be followed, including own Trumps, have not resulted in major moves in stock prices, according to Dow Jones Market Data.

Trumps the 2019 impeachment, alleging abuse of power and obstruction of Congress, saw the stock market end the day virtually unchanged.

Bill Clinton was impeached by the House in 1998, alleging obstruction of justice and perjury, linked to testimony. The markets at the time ended significantly higher the day after his dismissal.

Dow Jones Market Data

I do not have precise data on stock market performance during indictments. But we would say the business cycle is a much more powerful driver of stock performance than politics or politics, said Jeff Binder, equity strategist for LPL Financials.

Buchbinder listed six reasons the markets are apparently sidestepping politics right now, including the recent George Senate run-off races won by Democrats who give the party a slim majority in the upper house, including the tiebreaker. from Vice-President Kamala Harriss:

  • With the vaccine rollout underway, investors have gained greater confidence in the post-COVID 19 economic recovery.

  • The power transition is unlikely to significantly disrupt economic activity or corporate earnings, the fundamental drivers of stock prices.

  • Economic expansion is in its early stages, which tends to be favorable for stock market performance.

  • The Fed is expected to provide significant support for the foreseeable future, while interest rates, despite the recent upward movement in the 10-year Treasury yield, remain historically low.

  • With Democrats in control of Congress, we’ll likely have more stimulus spending after President-elect Joe Biden takes office, potentially in the $ 700 to $ 1 trillion range.

  • With only a tiny majority in the Senate, the Biden administration is unlikely to be able to push through all of the proposed tax hikes.

Rob Schroeder contributed item

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