Impeaching Trump Like ‘Bill Clinton 2.0,’ Wall Street Says
Demonstrators hold a banner during a protest against U.S. President Donald Trump outside federal court ahead of the Trump v. Deutsche Bank AG hearing in New York, U.S. (Photographer: Mark Kauzlarich/Bloomberg)

Impeaching Trump Like ‘Bill Clinton 2.0,’ Wall Street Says

(Bloomberg) -- 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 then-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. stocks dipped in Wednesday morning trading. The S&P 500 fell as much as 0.5%, amid mixed reactions to the prospect of an impeachment investigation and news China is preparing to buy more U.S. pork, and after a rough transcript of a call between Trump and the president of Ukraine was release.

Here’s a sample of the latest commentary:

Wells Fargo, Christopher Harvey

“Though a short-term repricing is possible, the latest impeachment news does not change our view of a 3088 year-end” S&P 500, Harvey wrote in a note. He said that “formal articles of impeachment being approved remains in doubt,” and even if they were approved, “history suggests impeachment is not a market-mover.” He flagged both Bill Clinton and Richard Nixon.

“Is This Even News?” Harvey wrote, asking whether Pelosi’s declaration has “any meaningful effect,” and questioned the “appetite for such proceedings among the all important estimated 30-50 moderate Democrats from districts where Pres.
Trump’s popularity cannot be ignored.”

Harvey added that “a serious move to impeach would not only place House members’ votes on record, but also include the impaneling of a special prosecutor and other procedural moves. Until we see those, we expect no further material impact on equities.” He continues to expect trade developments and the start of the third-quarter earnings season to be key market drivers.

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.”

Compass Point, Isaac Boltansky

“Pelosi’s’ announcement does not represent a seismic shift from a practical perspective,” Boltansky wrote, as the “House was already investigating the Trump administration and the committees of jurisdiction will continue with that work.” Plus, the Senate’s composition “effectively guarantees that removal from office is not on the table.”

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.”

Read more: Trump Impeachment Might Imperil Pelosi Drug Deal, Cowen Says

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% from 14%, 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.”

©2019 Bloomberg L.P.

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