Will Trump Survive To The End Of His First Term In Office?

As special counsel Robert Mueller impaneled a grand jury in the Justice Department’s investigation into Russian election interference, several Republican senators have started moving away from the President.  This has led to increasing speculation as to whether this is a signal that impeachment proceedings may be next.


As we’ve had a number of questions from clients on this issue, in this week’s Big Picture, we look at the likelihood of impeachment, the impeachment process, and potential impacts on the markets should it come to fruition.



The Impeachment Process


The impeachment of a President is not new in the US.  To be impeached, the Full House of Representatives debates on each Article of Impeachment.  Should any of the Articles of Impeachment be approved by a simple majority vote, the President will be ‘impeached’.  However, being impeached is like being indicted of a crime.  The President will remain in office pending the outcome of the next stage in the process, which is the Senate impeachment trial.  It is said that “the House impeaches, and the Senate convicts”.


The Senate holds a trial, over which the Chief Justice of the Supreme Court (John G. Roberts) presides, with all 100 Senators acting as the jury.  If, after the trial, two thirds of the Senate vote in favour, the result is a conviction, at which time the Senate votes to remove the President from office.  They also have the power to vote (by a simple majority) to prohibit the President from holding any public office in the future.



History of Presidential Impeachments


Only four times in history has Congress held serious discussions of presidential impeachment;



What are the Grounds for Impeachment?


The US Constitution states; “The President, Vice President, and all civil Officers of the United States, shall be removed from Office on Impeachment for, and Conviction of, Treason, Robbery, or other High Crimes and Misdemeanors”.  High Crimes and Misdemeanors are 1. Real criminality – breaking a law; 2) abuses of power; 3) violation of public trust. 


Historically Congress has issued Articles of Impeachment for acts in three general categories;


I’ll leave it up to the reader to determine if any of the above applies to the current President.



Probability of Trump Impeachment


It’s very difficult to see a scenario where Trump gets impeached given that the Republican party controls both the House and the Senate.  However, that doesn’t mean it won’t happen if more and more Republicans turn their back on the President, perhaps to get a leader they believe would be a stronger President in the Oval Office.  The odds-makers however are running a book on the likelihood of Trump failing to make it to the end of his first term as President.  This could be from impeachment or resignation.  The odds of failing to make it through the full first term are 48%.  That is getting quite serious.



If Trump is Out, What Happens Next?


If Trump dies, resigns, or is removed from office, Vice President Mike Pence would replace him.  If, for some reason Pence were unable, or unwilling to step up, then Speaker of the House Paul Ryan would be next in line.


President John Adams famously told his wife that the position of Vice President is “the most insignificant office that ever the invention of man contrived or his imagination conceived”.  That may be so most of the time, as the VP attends state funerals and weddings, but consider this; nine Vice Presidents have carried out the remainder of a presidential term because of a sitting President’s death or resignation.  Four of those later were elected to a full term.



Potential Market Reaction


That’s a more difficult question. Pence is well-liked in Republican circles, and is viewed as a calming presence for those within the party who aren’t too keen on Trump. However, Pence also comes with some questions given his own description of himself as “a Christian, a conservative, and a Republican – in that order”.  He is on the far right of the party, having been an early believer in the Tea Party, and has signed many controversial bills into law.


However, as a steady pair of hands, the market reaction would likely be positive, and eventually we’d likely see a strengthening USD and a rally in US equity markets.  However, in the first instance, the impeachment process would bring with it disruptive headlines, an initially unknown outcome, and market volatility.


Looking to the past to try to predict the future doesn’t work very well in this instance as Bloomberg prices only go back as far as 1967, so gives us only 2 data points, Nixon and Clinton.  And clearly there were many other forces impacting markets aside from the impeachment issues. 


However, as two points of reference, during the Nixon impeachment debate in Congress, the US Dollar Index sold off by over 10%, and post his resignation rallied 6% in the next 6 months.  Post-resignation, the Dow Jones sold off 34%.


Leading up to the Clinton impeachment, the Dollar Index sold off 9% and then rallied 10% after he was acquitted by the Senate.  During the same time, the Dow climbed steadily higher by >30%.


What can be said is that in both cases there was significant market movement over the period spanning the impeachment events. 


Author: John Glover


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