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New revelations stemming from Congress’ impeachment inquiry have barely made a dent in the market’s gains so far, suggesting that investors may be too optimistic about mounting risks that could result in President Donald Trump’s removal from office.
Despite being whipsawed by fears from the U.S.-China trade war and a global slowdown, the S&P 500 (^GSPC) and the Dow Jones Industrial Average (^DJI) are sitting near record highs, prolonging the longest bull run in U.S. history.
But the market’s decision to shrug off Trump’s growing political woes—stemming from whether he solicited foreign governments to help him politically—may backfire. Some think that could turn out to be a colossal mistake for investors’ portfolios.
As a probe about Trump’s interactions with Ukraine — and whether he asked the country’s president to probe the son of ex-Vice President Joe Biden — reach full boil, new questions have surfaced about whether the president also sought Australian Prime Minister Scott Morrison’s help in discrediting special prosecutor Robert Mueller’s Russia investigation.
“The markets are just way too sanguine and I think politicians are just way to sanguine over this impeachment process. You never know where these things can go,” said Andy Busch, a market veteran and former chief market intelligence officer at the Commodity Futures Trading Commission on Yahoo Finance’s “On The Move.”
He added: “You just don’t know what they’re going to dig up, what they’re going to find.”
Busch believes the long-term risks of an impeachment process for Wall Street is that it could help a Democrat defeat Trump — a scenario for which markets currently aren’t fully positioned.
“If this hurts President Trump and really derails his presidency, especially as he gets into the election of 2020, the markets better start paying attention much more closely to what these 2020 Democratic plans are for the economy because they are very different and they will have significant impacts on the structure of the US economy,” he said.
A fight to ‘not give the president anything’
Investors should brace themselves for more market volatility as the 2020 race moves full steam ahead and reality starts to settle in. Senators Elizabeth Warren and Bernie Sanders are strong contenders for the White House — and should they win, Corporate America and the people who run those companies could be facing significantly higher taxes.
Sanders’ new income inequality tax plan, as well as Warren’s own plan to tax the wealthy, give investors a sample of what could happen if a Democratic wave sweeps the White House and Congress next year. Analysts have warned about the long-term effect the plans could have on the economy.