What have you done for me lately?
That could be financial markets’ response to President Trump, who seems to think he’s the indispensable man. He’s not.
Trump suggested this week that the economy would collapse if he found himself in legal and political jeopardy. “If I ever got impeached,” he told Fox News, “I think the market would crash. I think everybody would be very poor because without this thinking, you would see numbers that you wouldn’t believe.”
It’s not clear what “thinking” or which “numbers” he’s referring to, but Trump is basically taking complete credit for an economic recovery and a bull market that began more than seven years before he took office. We get it—just a little hyperbole, all the politicians do it. But it still demonstrates a cavalier misunderstanding of economic fundamentals. For this reason, this week’s Trump-o-meter reads WEAK, our third-lowest rating.
Presidents don’t affect the economy as much as people might think. “I don’t think the occupant of the White House has a large influence on the financial markets,” Eddy Elfenbein, manager of the Focused Equity ETF, wrote in a recent newsletter to clients. “In the long run, it’s all about sales, earnings and interest rates. Money stuff: that’s what counts.”
The president can certainly influence the direction of markets in the short term, through policies that are helpful or hurtful to businesses. The tax cuts Trump signed at the end of 2017 have probably helped markets, for example. But they’re signed, delivered and thoroughly digested at this point, and if Trump were to leave, the tax cuts would remain.
Beyond that, there’s not much Vice President Mike Pence or any other possible Republican president would do differently than Trump, except, perhaps, pull back on the trade wars. And markets would applaud that, rather than jeer. Jeremy Siegel, finance professor at the University of Pennsylvania’s Wharton School, said this week that stocks could rise another 10% if Trump were to resolve all his trade disputes.
The impeachment scenario
So what about that impeachment scenario? For starters, it’s notable that Trump would even acknowledge it publicly. That suggests two things: 1. He realizes it’s an idea now fully in the public consciousness. 2. He thinks he might be able to capitalize on it, by further portraying himself as a victim of bloodthirsty Democrats and overeager prosecutors.
Whether he’s right probably depends on whether he actually committed a crime worth prosecuting. This week’s head-spinning news suggests Trump was at least complicit in a couple of campaign-finance violations that could be felonies. Prosecutors probably wouldn’t go after a sitting president for that, however. Still, news that Allen Weisselberg, finance chief of Trump’s real-estate firm, may be cooperating with prosecutors, suggests worse legal trouble may lie ahead for Trump.
If Democrats do take the House, markets will begin pricing in the implications of impeachment on Nov. 7, the day after the election. It would still be several months before Democrats got seated in 2019, and began impeachment proceedings, if it got that far.
Even then, Bill Clinton’s experience in 1998 reminds us that if the House votes to impeach a president, he still remains in office. It would take conviction by two-thirds of the Senate to actually drive Trump out of the White House. And that would require a bunch of Republican votes, which would never happen, unless it turns out Trump committed crimes as severe, say, as conspiring with Russia to undermine a U.S. election. There’s no evidence he has.
One development that would unnerve markets more than impeachment is Trump firing special prosecutor Robert Mueller. If a president leaves office before his term ends, there’s a clear and proven path of succession. But if a president abuses his power and provokes an unprecedented constitutional showdown, it’s less clear what happens. Could Trump seize control of the Justice Department and start rounding up political enemies? It sure seems like he might like to. Who would stop him? How?
The United States has a deep legal code, with a thorough set of checks and balances, that mostly seems to be working amid the Trump saga. That’s keeping markets sanguine. If it begins to look like American democracy is failing, markets will let us know. With or without Trump.
- Why the Manafort verdict should worry Trump
- Here’s the risk for Trump in Michael Cohen’s guilty plea
- How to help Trump win his trade wars
- Some Republican approve of Russia’s help in elections
- Socialists are coming for the Democratic party
Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman