Calculate your SIP ReturnsExplore

Will Trump Be Impeached?

05 August 20225 mins read by Angel One
Will Trump Be Impeached?
ShareShare on 1Share on 2Share on 3Share on 4Share on 5

To understand the end of the end of the Trump Rally, one needs to first understand what the Trump rally was all about. When Trump was voted to power in November 2016, it raised hopes that Trump would live up to his promises of cutting individual and corporate taxes as well as investing $1 trillion in infrastructure. These two factors combined were expected to trigger a virtuous cycle of higher incomes, higher consumption and higher growth in the US. Being a bellwether economy, the benefits to the US economy were expected to rub off on other economies like India. The chart below captures the movement of the Dow Jones Index and the Nifty over the last 1 year, with the movement since November being specifically highlighted…

Since November 09th when Donald Trump was officially elected the US President, the Dow Jones and the Nifty have almost moved in tandem. Since both the charts are to the base of 100, the comparison is much clearer. While the Nifty has given a return of 19.81% since Trump won the Presidency, the Dow has returned 17.58%. This was the global asset price rally that was largely driven on the back of hopes that Trump will make a substantive difference to the US economy and in the process, the rub-off effects will be felt across the world’s key economies.

So what exactly has gone wrong with the Trump story?

In fact, quite a few things have gone totally awry and the initially sheen surround the Trump presidency appears to be gradually wearing thin. Consider the following instances…

  • There were great expectations pertaining to early announcements by the Trump administration pertaining to the tax cuts and the infrastructure outlay plan. However, over the last 3 press conferences, Trump has chosen to stick to his broad statement of intent rather than getting down to the detailing. Markets were expecting a clearer time-table for implementation and a lot more of specifics. But even 6 months after being elected, the markets are still clueless about the direction that Trump intends to take.
  • In many cases, Trump has failed to live up to the aggression of his assertions. We saw that in case of the proposed wall along the Mexican border. We also saw that in the case of deportation of illegal immigrants from Latin America. Trump did attempt to apply the brakes on outsourcing of jobs but that has also run into a legal quagmire. Lastly, Trump’s plans to scrap Obamacare altogether ran into trouble with his own Republican senators opposing the move. All these have raised serious doubts about the ability of Trump to push through much more complicated legislations like drastic tax reforms.
  • Through the Trump campaign, Russia appears to have been the centrepiece. Firstly, there were strong allegations that the elections had been rigged by Russian hackers with the full knowledge of Putin and Trump. Now it has also emerged that Trump had apparently shared classified information with the Russian officials. All these have raised concerns that the Trump administration may end up spending more time fire-fighting.
  • But the biggest embarrassment for Trump has come after he fired the FBI chief, James Comey. Apparently, a memo jotting by James Comey reveals that Donald Trump had asked him to withdraw his investigation against the National Security Advisor, Michael Flynn. Even if there is some truth to this allegation, then it amounts to obstruction of justice and actually is a valid ground for the impeachment of the US president. That is what has particularly spooked the global markets.

What happens from here; can the POTUS be impeached?

Remember impeachment marks the start of the investigation proceedings against the president. An impeachment does not automatically lead to the removal of the president. In the past, impeachment proceedings were initiated against 3 previous US presidents viz. Andrew Johnson, Richard Nixon and Bill Clinton. Both Andrew Johnson and Bill Clinton were exonerated of the charges and allowed to complete the term of their presidency. However, Richard Nixon voluntarily resigned following the Watergate Scandal. Hence, there is historically no evidence of a US president being removed from office after initiating impeachment proceedings. Even markets are betting that while impeachment proceedings are likely, removal does look quite unlikely. However, it would mean that a lot of reforms proposed by Trump will be put on the back-burner. That is enough to disappoint markets.

What does that mean for Indian markets?

While Indian markets are likely to face some temporary disruptions, long term damage to Indian market is highly unlikely. In fact, the entire imbroglio may force Trump to become a little more measured on his ultra-aggressive stance with respect to foreign businesses operating in the US. That should be a major positive for Indian companies. Additionally, Indian economy is not overly dependent on the US economy and the domestic demand drivers are likely to remain intact. In fact, the temporary correction that the markets may offer in India would be an opportunity for investors to meaningfully restructure their portfolio. This can include adding on to quality stocks and booking out from froth.

The entire Trump story may be a case of “Much ado about nothing”, at least from India’s perspective. The markets will be more worried about the reversal of the reform expectations and that could temporarily prove to be a glitch. In the slightly longer term, nothing really changes for Indian markets!

Enjoy Zero Brokerage on Equity Delivery
Enjoy Zero Brokerage on Equity Delivery

Get the link to download the App

Send App Link

Enjoy Zero Brokerage on
Equity Delivery