- Strategists said investors expect the Republican-controlled Senate to acquit President Trump, following Wednesday's vote by House Democrats to impeach him.
- Stocks were able to gain 5% since the House of Representatives first voted Oct. 31 to conduct impeachment proceedings against the president because investors did not fear he would be removed from office.
- The impeachment should not have any negative impacts on fiscal or monetary policy, but may have brought some positive developments, like the China trade deal and bipartisan support for a new NAFTA.
Markets are shrugging off the impeachment of President Donald Trump because he is not expected to be removed from office, and there should be no negative impacts on fiscal or monetary policy as a result.
Investors have instead focused on recent positive developments, like the trade agreement being worked out between the Trump administration and China, which should stop some strains on the economy and earnings.
"Trump needed his victories. He's got NAFTA, we got a China deal, and we got a budget. He got all these victories while he was under impeachment," said Daniel Clifton, head of policy research at Strategas. Treasury Secretary Steven Mnuchin said Thursday that the trade agreement with China will be signed in January.
Both the budget accord and trade deal with Canada and Mexico were able to get bipartisan support even in fractious Washington where only Democrats voted for impeachment. The White House indicated support for the budget bills which avoid a government shutdown and were approved by the Senate on Thursday. Also Thursday, the House approved a new version of a trade accord with Canada and Mexico to replace the North American Free Trade Agreement.
The House of Representatives voted Wednesday to impeach Trump on charges abuse of power in his dealings with Ukraine as well as obstruction of Congress. He is the third president to be impeached though none have ever been found guilty. President Bill Clinton was the last modern president to be impeached, and Andrew Johnson was impeached in 1868. Richard Nixon resigned in 1974 before he could be impeached for Watergate.
"Investors have virtually ignored what's going on in Congress. They care about the economy. They care about profits. They care about trade, and if they thought the president was in serious jeopardy of losing his job, they'd care," said Jack Ablin, chief investment officer at Cresset Wealth Advisors. "It's just a disruption removing a president. It would probably undermine the value of the dollar, create some uncertainty and make [Vice President Mike] Pence the president."
More important is the course of the economy, which is showing some mixed signals. "We're looking really at first quarter data and the election," Ablin said. "The strong data is getting a little bit weaker which was the labor market and consumer, and the weaker data, like the manufacturing, production data is getting a bit stronger."
The House voted to conduct impeachment proceedings on Oct. 31, and all during the process, stocks rose. The S&P 500 is up about 5% since that date, and hit another new high Thursday, as it crossed 3,200 for the first time, closing at 3,205. It's up more than that since they began the inquiry.
Marc Chandler, chief market strategist at Bannockburn Global Forex, said investors are only concerned about the impeachment, in that it shows a divided country.
"It's not going to affect monetary policy or fiscal policy, and people think it's not going to happen. It's more of an embarrassment," said Chandler. "In the first 100 years, they only tried to impeach Johnson. It's what it means for American politics." Chandler said he's heard concerns that impeachment could become more commonplace, and a Republican Congress, for instance, could try to impeach the next Democratic president.
Chandler said investors are more focused on fundamentals, and in the currency market, like the stock market, it has not been a factor. "I think the more important thing is policy, and what's going on in the interest rate differentials. I just don't see how the substance has relevance for foreign exchange," he said. "Unless you think Trump is going to be removed, it's American political noise."
Chandler said more important to the stock market has been trade. "Micron says they think the industry is bottoming. That's what is important for investors," he said. Micron Wednesday said it expected a recovery in 2020 after seeing a "cyclical bottom" in the second quarter. It also said it had received all requested licenses to supply some products to its largest customer, Huawei Technologies, a Chinese telecom company blacklisted by the Trump administration.
Clifton said it's important to watch House Speaker Nancy Pelosi's efforts to delay passing the impeachment to the Senate, where there would be a trial.
"The market doesn't care about impeachment, but there are byproducts of impeachment that could matter for the markets," Clifton said. "If you delay impeachment for a couple weeks, and you delay the Senate trials, you're removing Warren and Sanders from the campaign trail" just ahead of primaries.
"I think that's market friendly," he said, noting other Democrats with less progressive views could move to the forefront and that would make a difference for industry sectors. Sens. Bernie Sanders and Elizabeth Warren are considered negative for health-care stocks, and Warren is viewed as negative for financial sector stocks.
Clifton said Pelosi may also be hoping to have the new USMCA trade bill with Canada and Mexico approved by the Senate before it takes up impeachment. Senate Majority Leader Mitch McConnell has said the Senate would take up the bill after its impeachment trial. Pelosi may be trying to push it forward because she views that bill as helpful for some of the Democratic representatives in districts that are risk of being taken by Republicans, he said.