Market Won't Crash If Trump Faces Impeachment, Barclays Says

(Bloomberg) -- President Donald Trump has warned that the stock market would plummet if he were impeached. Barclays Plc disagrees.

“We doubt that capital markets would collapse if President Trump’s administration was endangered, either electorally or indeed legally,” William Hobbs, head of investment strategy at Barclays Investment Solutions in London, said in a blog post. “The forward momentum of the world economy, and therefore its capital markets, has little to do with the actions of the White House, past, present or future, in our opinion.”

Back in February, Barclays pointed out that the “Trump rally” in U.S. equities primarily has its roots in the period before the 2016 presidential election, and is based on economic factors, such as oil’s recovery and looser policy in China. The U.S. stock market is in the middle of the longest bull market ever and traders have been piling into American equity funds, while pulling money from European and emerging-market investments, as the booming economy makes the U.S. a haven.

Examples of investigations into the conduct of former presidents Bill Clinton and Richard Nixon show that the state of the economy defined the market’s direction, not the leaders’ legal troubles, according to Barclays. In Nixon’s case, the oil crisis and recession hit equity and bond markets before his resignation, while during the Clinton-Lewinsky scandal, stocks maintained a rally fueled by the dot-com bubble, Barclays said.

“The lesson from all this is that the wider economic context matters most for capital markets,” Hobbs wrote.

Trump had one of the worst days of his presidency last month when his personal lawyer, Michael Cohen, implicated him in a crime, almost at the same time his former campaign chairman, Paul Manafort, was convicted on eight counts of fraud. Despite this, the S&P 500 Index reached a fresh record high a week later.

To contact the reporter on this story: Ksenia Galouchko in London at kgalouchko1@bloomberg.net

To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, Monica Houston-Waesch

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