When House of Representatives Speaker Nancy Pelosi formally announced an official Congress impeachment inquiry on September 24, 2019, one of the most pressing questions investors asked is how a potential Trump impeachment and removal from office might impact their portfolios. In today’s article, five top wealth managers share their answers to this question.
In this article:
- Lewis Altfest: Trump Impeachment Shock May Take Time
- Thyra Zerhusen: Trump Impeachment Stock Market Effect — Uncertainty Isn’t Good for the Market
- David Donabedian: Trump Market Effect Is Minimal
- Dom Catrambone: Trump Impeachment Impact on the Stock Market Is Only Temporary
- Chris Zaccarelli: Trump Market Effect Is Mostly Noise
How a Trump Impeachment Might Impact Stocks | 5 Top Wealth Managers Speak Their Minds
Short Background on the Issue
Pelosi’s inquiry comes at the heels of a whistleblower complaint against President Trump. According to the report, the President had former Vice President Biden and his son investigated by Ukranian head of state Volodymyr Zelensky over allegations of corruption.
Stocks fell after the announcement, which was later reversed after the President revealed that a US-China trade deal may be imminent. However, stocks traded lower again the following day amidst geopolitical uncertainty and fears among investors, which has been building up for some time.
1. Lewis Altfest: Trump Impeachment Shock May Take Time
Lewis Altfest, who is CIO of Altfest Personal Wealth Management, believes that the shock won’t unravel instantly. He said the greater issue that may impact the market directly is whether the US and China can work out a trade deal.
However, impeachment and the possibility of removal from office can indirectly affect the stock market if it pressures President Trump to get trade deals done, fast. If he makes deals just to beat his possible impeachment’s timeline, he may end up compromising with poor economic deals.
For investors, Altfest also emphasized the importance of a conservative investment strategy to protect against wild market swings. Such a strategy involves allocating more of one’s portfolio in stable, value stocks instead of speculative and over-valued ones.
2. Thyra Zerhusen: Trump Impeachment Stock Market Effect — Uncertainty Isn’t Good for the Market
While volatility can be an investor’s best friend, too much of it can turn it into a mortal enemy, too. According to Thyra Zerhusen, CIO of Fairpointe Capital, the US stock market has had too much volatility and uncertainty for an extended period of time already.
According to her, another thing that has contributed to this volatility is President Trump’s tariff negotiations with China and Mexico. All these have only made the market uncertain and unproductive.
Nevertheless, she believes that investors should simply continue with their current strategies, albeit with more caution. She advises, among other things, to continue adding undervalued stocks to one’s portfolio while considering the possible impacts of tariffs.
3. David Donabedian: Trump Market Effect Is Minimal
According to David Donabedian, it’s not easy to “shock” the market now. He believes this is because of all of the chaos that has happened in Trump’s first two years in office.
The CIBC Private Wealth Management CIO believes it’s like the market has gotten used to regular “shocks” already.
Donabedian pointed out that the market’s reaction to Pelosi’s announcement of the impeachment proceedings was only “slightly negative” and rational. He also said investors today are more focused on market fundamentals than a possible impeachment.
Donabedian believes a bigger factor that’ll impact the stock market is the possibility of a stall in policy and trade negotiations.
According to him, these have been the financial market’s looming dark cloud for the last one and a half years. He says a common worry related to this is that a potential impeachment might further delay these deals.
According to Donabedian, he’ll continue monitoring the situation and Pelosi’s actions. He believes she’ll work on making progress on both the impeachment proceedings and trade policies. Both of these can have a big impact on the market.
4. Dom Catrambone: Trump Impeachment Impact on the Stock Market Is Only Temporary
Volshares Large Cap Exchange-Traded Fund CEO Dom Catrambone believes political proceedings, games, and predictions aren’t permanent financial events for US financial markets. He says their long-term impacts on financial markets can be very challenging to predict.
However, he also shared one way on how political headlines can impact today’s market. These headlines can increase short-term volatility because of computer-driven algorithmic trading.
He explains that computer trading programs or algorithms are affected by keywords from daily news sources that trigger certain trading actions. Some of these keywords include “Trump,” “impeachment,” and “removal from office.”
So, the more the Trump impeachment proceedings hog the headlines, the more it can trigger short-term, algorithmic trading. Considering the huge amounts of money computers trade in the market, the primary impact a Trump impeachment brings is higher market volatility.
5. Chris Zaccarelli: Trump Market Effect Is Mostly Noise
Unless President Trump is removed from office, the market will probably just look past political headlines. This is what Independent Advisor Alliance’s CIO Chris Zaccarelli believes will be the Trump impeachment impact on financial markets.
In other words, these political headlines are mostly just market noise that investors will most likely ignore. To illustrate his point, he mentioned a previous incident that also involved an attempt at impeaching a president.
He cited the last presidential impeachment proceedings involving Bill Clinton in 1998, which didn’t result in his removal from office. According to Zaccarelli, the S&P 500 even rose by as much as 27% during the impeachment.
Until House members conclude their investigation and vote to impeach, and unless it becomes clear that senators will vote him out, Zaccarelli advises investors to simply ignore most Trump impeachment headlines. He says there’s no need to change one’s investment strategies.
And if investors are using a conservative, long-term buy-and-hold investing strategy, they don’t need to be concerned with market volatility. Zaccarelli says wild market downswings are great opportunities to pick up quality stocks at a discount.
The impact of the Democratic National Convention’s attempt to impeach Trump on the stock market seems mixed, at best. Some believe it might have direct and serious consequences on the market. On the other hand, others believe the impact will be indirect and temporary only.
However, long-term, value stock investors need not concern themselves with the short-term market volatility, regardless if due to an official impeachment or other politics-related headlines.
Note: This article was adapted from Business Insider’s September 29, 2019 article, “We spoke to 5 money managers about how Trump impeachment proceedings could impact the stock market. Here’s what they said.”
Do you believe a Trump impeachment can impact the stock market? Why or why not? Let us know in the comments section below.