Few political events in my 39 years come close to matching the theatrics of President Trump’s first few months.
The man has barely changed the drapes and yet, already, earnest whispers of impeachment circulating the corridors of power have increased from a din to a clamour.
Presidents Ronald Reagan and George H W Bush are vague memories – I was too young to be fully aware of the former, while of the latter, the Gulf War and infamous “no more taxes” statement are all I can remember.
Bill Clinton, with his own impeachment a la Monica Lewinsky, survived; George W Bush I shan’t even attempt to approach, and of course Barack Obama, whose tenure already seems like a distant memory, was largely well-behaved. Then along came Trump. If the world is a stage, he is a thespian, easily winning the Oscar for most dramatic presidency. But could an impeachment really be on the cards?
Since landing on the White House lawn, the President has provided an unending deluge of controversy, from executive orders undoing decades of progress, to bemusing errors of judgement that are putting comedians out of work.
But most importantly, his connections to Russia, and attempts to evade them, have raised suspicious eyebrows the world round.
High profile firings did not help his case, especially that of FBI director James Comey, who, under oath, called Trump a liar last week. Comey said he believed he had been directed to end an investigation into former national security adviser Michael Flynn. Flynn is suspected of helping Trump communicate with Russian President Vladimir Putin without the knowledge of the US national security.
Whether Trump’s alleged actions amount to an obstruction of justice is moot – he disputes Comey’s recollection, and on Friday said he is “100 per cent” willing to give his own version under oath.
Markets react to impeachment
As soon as “Trump Impeachment” appeared in the media, the US dollar index, which measures the strength of the dollar against six major currencies, dropped to a six-month low. US and global stocks came under pressure and the VIX, which is known as the volatility index that gauges the fear on Wall Street, made its biggest daily move since 24 June 2016. A week before that, the VIX had registered its lowest close since 1993.
Considering gold is a safe-haven that traders tend to turn to when the market is unsteady, it could gain following more Trump impeachment speculation, and possibly reach the key level of $1,270, followed by another potential level of $1,300. Added to the fact that a June rate hike is not very likely to happen, gold could be in a good place to see potential gains.
Buy the rumour, sell the fact
If Trump is impeached or resigns, there is a possibility of seeing a different course of action. First, we just might see a case of “buy the rumour, sell the fact,” which would help gold gain leading up to the possible impeachment, but if the impeachment does happen, then gold prices are likely to retrace their gains. Second, Mike Pence (who would replace Trump) could bring positivity to the situation due to his strong relations with Capitol Hill and his experience in the political arena – both facts could help him pass the necessary tax reforms that the market desires.
Trump impeachment versus the Clinton impeachment
Bill Clinton’s presidency was far from squeaky clean and endured a number of scandals in the 1990s. Eventually, he was impeached by the House of Representatives in 1998 for perjury and obstruction of justice connected to his affair with Monica Lewinsky. Clinton was subsequently acquitted by the Senate, in 1999.
The reaction of the market in the build up to the impeachment fell, but on the official announcement it rallied, covering all its previous losses. Gold, meanwhile, had no reaction whatsoever. In hindsight, the market not highly affected by the whole ordeal.
Almost 20 years later times have changed, and the market is obsessed with politics. Especially in the past 12 months or so, the Brexit vote, Trump’s unexpected election and the UK snap election are a few of the political events that have caused a riot in the markets.
Based on said facts, a Trump impeachment is very likely to repeat the pattern.
Furthermore, Clinton’s impeachment was a slow buildup, while speculation of Trump being potentially impeached has been ramping up much faster.
Trump impeachment odds
A Trump impeachment is possible, but an impeachment does not happen overnight. It can take months, even years to come into place, and it does not have strong precedent, with only two impeachments in US history.
In my opinion, it is most likely to happen similarly to Richard Nixon’s impeachment. Nixon resigned before the impeachment vote took place; Trump may very well do the same.
UK-based bookmarker Paddy Power’s odds on Trump impeachment in 2017 are at 3/1, while odds against Trump’s survival of a full first term are at 5/6 against him. Polling doesn’t look much better, with a recent Gallup poll showing the President’s approval rating to be lower than his chances of impeachment. Only time will tell.