Would a Trump Impeachment Crash the Markets?
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Would a Trump Impeachment Crash the Markets?

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Would a Trump Impeachment Crash the Markets?

Unless you've spent the past year under a rock, you've probably heard about the scandals and partisan divide that are dominating national politics. Washington has been in almost constant turmoil, but stock markets have climbed higher with little regard for the unprecedented media coverage of the Trump presidency.

With the drumbeat of impeachment being amplified by Democrats with every passing day, however, there's no denying the real possibility of President Trump being removed from office before the next election in 2020.

So how seriously should we take this possibility? What's the best way to plan for such a scenario?

Impeachment Is a Political Process

Obviously, the risk of a Trump impeachment hinges upon the political makeup of Congress. The House of Representatives must first bring articles of impeachment against the president, and then the "case" is "tried" in the Senate.

This is a purely political process, not a technical legal process. Whether or not Trump broke any campaign finance laws or violated the Constitution's emoluments clause, it's up to the legislature to judge his fate. Many pundits don't seem to understand this distinction.

At any rate, investors would be best served to put their political leanings aside when evaluating how serious or defensible the impeachment threat is. Your portfolio won't care what side of the aisle you're on if the hammer drops.

Whatever you think of his populist policies notwithstanding, Trump's possible legal troubles have been an ongoing distraction for his administration. The president himself recently warned that the stock markets would crash if he were to be impeached.

It's worth examining whether or not this outcome is probable, as well as what average investors can do to insulate themselves from any catastrophic downturn in the financial markets.

Would Markets Actually Crash?

If nothing else, removing Trump from office would cause a major disruption: It throws into question whether his policies continue—or will his platform be unraveled by his successor? This is especially pertinent with regard to his views (and actions) on trade policy.

Even if Trump can survive impeachment, the negative perception could severely hamstring his presidency. Again, this is particularly true in terms of international trade: Leaders from other countries are likely to have less trust in Trump if there appears to be a risk that he won't remain in office for much longer.

Then again, as mentioned above, the markets have almost invariably shrugged off any concerns coming out of Washington these past two years. One might justifiably wonder why "this time is different."

It's useful to consider how markets performed during previous impeachment episodes, courtesy of Richard Nixon and Bill Clinton.

Although Nixon wasn't formally impeached, resigning from office before Congress could act, the constitutional crisis triggered by his actions during and after the Watergate scandal caused widespread uncertainty. Markets fell in the aftermath of Nixon's resignation.

Bill Clinton was actually impeached by the House but was then let off the hook by the Senate. Even as Clinton's controversy and subsequent lies were a source of near-constant media scrutiny, markets actually went up amid the circus atmosphere.

The American economy of the early 1970s and the late 1990s were rather different, of course, which could account for the disparity in how markets reacted.

Owning gold and silver has always proven to be a smart way to hedge against these kinds of disruptive events. Even if precious metal prices don't rise precipitously during hypothetical impeachment proceedings, the point is that they provide stability during precisely this kind of crisis scenario.

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.

About the Author

Everett Millman

Everett Millman

Analyst, Commodities and Finance
Managing Editor

Everett has been the head content writer and market analyst at Gainesville Coins since 2013. He has a background in History and is deeply interested in how gold and silver have historically fit into the financial system.

In addition to blogging, Everett's work has been featured in CoinWeek, Advisor Perspectives, Wealth Management, Activist Post, and has been referenced by the Washington Post.

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