‘Buckle up’: Pelosi launches formal Trump impeachment inquiry
House Speaker Nancy Pelosi’s decision to launch a formal impeachment inquiry of Donald Trump is reminding analysts of proceedings against Bill Clinton in the 1990s, which failed to topple a popular president. Other events had more of a market impact then, and might now, too.
Observers also expect little from Congress ahead of the 2020 elections, as the inquiry may sideline potential moves on drug pricing, infrastructure and the USMCA. A deal with China is still up in the air, while an already slipping Joe Biden seems to have been weakened, and Elizabeth Warren’s chances seem to have brightened.
U.S. futures dipped in pre-market trading on Wednesday, amid mixed reactions to the prospect of an impeachment investigation and news China is preparing to buy more U.S. pork.
Here’s a sample of the latest commentary:
KBW, Brian Gardner
KBW is “confident that regardless of whether or not the House votes to impeach Mr. Trump, the Senate will not remove him from office,” Gardner wrote. He noted that using the 1998-1999 impeachment of President Bill Clinton as a proxy shows impeachment had “little impact on the market,” with events connected to the Russian default crisis and the Asian financial crisis triggering greater market moves.
Gardner also sees Trump’s reelection prospects as improving slightly, as the president “has a unique ability to manipulate these kinds of situations to his advantage.” A House move to impeach may backfire and unite Republicans. The news coverage is hurting Biden, he added, and helps Warren, while “Trump has a better shot at beating Sen. Warren in the general election than he does against Mr. Biden.”
Raymond James, Ed Mills
“Legislating is dead,” Mills wrote in a note, as “impeachment will lead to Congress doing nothing except that which it must do by established deadlines (like funding the government).” That means there probably won’t be bipartisan action on drug pricing, infrastructure, and passing the USMCA until after the 2020 election.
Regarding China, he said, “the debate will be about a Trump pivot towards a win via a ‘mini deal’ or doubling down to cater to his base,” as per his U.N. speech on Tuesday. Mills also said “impeachment is bad for Biden,” as hearings will keep the “Trump-claimed Biden and his son issue in the news,” and undercuts Biden’s “return to normalcy” campaign.
There’s a “real risk that Democrats overplay their hand, increasing Trump’s reelection chances,” Mills added. At the same time, more uncertainty might hurt consumer and business confidence, he said, with any increased risk for recession possibly dooming Trump’s reelection.
Beacon Policy Advisors
“The latest impeachment imbroglio is a negative catalyst for markets,” the firm wrote. “While political gridlock is often good for markets by reducing the risk of government interference, dysfunctional paralysis of government is not because it increases uncertainty over the government’s ability to handle a crisis.”
Beacon sees a higher risk of a “Trump-induced event, akin to the government shutdown last year, in order to distract attention from the impeachment headlines.”
Evercore ISI, Sarah Bianchi
“Putting the focus on impeachment is an enormous undertaking that makes everything else harder,” Bianchi wrote, including prescription drug pricing legislation and the USMCA.
As for whether it matters for the election, Bianchi said “impeachment politics are tricky and unpredictable. It is very possible that it will just further put each side in their respective camps and further polarize the country. What it does to the moderate middle of the road voters is very hard to say.”
Cowen, Chris Krueger
On Tuesday, Krueger said he expected the House will impeach Trump, while the Senate won’t convict, a scenario he called “Bill Clinton 2.0,” adding that “this could all be over by the end of 2019.”
RBC, Brian Abrahams, biotech analyst
Investors may want to come back to biotech as drug pricing probably won’t be overhauled now, Abrahams wrote in a note. An impeachment investigation may create “a sustained impasse,” he said, and “reaffirm the low likelihood of draconian price cuts and over time improve investor confidence returning to the biotech space.”
RBC, Adam Cole, currency strategist
“We would note that this is only a small step on the road to impeachment, which would ultimately require a 2/3 majority in the Republican-controlled Senate and that it is not clear yet whether the House will vote to endorse the inquiry,” Cole wrote. He flagged Betfair’s probability of Trump leaving before the end of his first term jumping to 22 per cent from 14 per cent, which was “still far below levels that prevailed in the early part of his presidency.”
“Beyond the knee-jerk reaction to rising uncertainty, it is also unclear that diminishing risk of a returned Trump would be negative for risk assets.”
--With assistance from Cristin Flanagan.