Here’s How the Markets Will React to a Trump Impeachment

I have to admit – I wasn’t too surprised that congressional Democratic leaders roiled markets last week when they announced a formal impeachment inquiry into U.S. President Donald Trump.

Love him or hate him, I wish politicians would give it a rest.

As Chief Investment Strategist, I care about one thing and one thing only: helping you invest profitably. I’m here to help you grow and protect your money.

And the markets care about one thing and one thing only: how likely impeachment proceedings are to succeed… and what a President Mike Pence administration might look like.

OK, technically that’s two things – no matter.

Let’s run through the possibilities. They’re not as scary as they might seem…

Here’s What Matters to Global Investors and Traders

Stock markets are, by their essential nature, forward-looking, future-discounting “organisms.” They’re always looking ahead, which means there’s not likely to be much crying over yesterday’s spilled milk.

Every day, I talk with traders all across the planet, and, overwhelmingly, they’re already focused on what a Pence administration would look like and how that might impact the bets they’ve made on manufacturing, productivity, labor, prices, and much more.

My trading contacts want growth very simply because growth is great for their money – and yours, too, no doubt.

From an investment standpoint – and it doesn’t matter if they’re personal fans of this president or they hate his guts – what these traders don’t want is some sideshow that distracts everyone from moving ahead. And I don’t care if it’s impeachment, investigatory hearings, or ordering a pizza, congressional proceedings are by nature… big, noisy, neon-lit sideshows.

So what’s that mean?

It means, in the short term, profits will suffer, and so will the markets. The two are intrinsically linked.

People are already drawing comparisons to the Clinton impeachment back in 1998, but I think the real comparison is the lead-up to Richard Nixon’s resignation in 1974; he of course resigned before he could be impeached and removed.

Then, as now, the market had peaked. In the case of Nixon, it peaked a full eight years earlier, in 1966.

This time around, we saw the peak just 11 weeks ago.

Whatever Happens, Be Prepared with This

The stock markets of 1974 were already under pressure from the 1973 Arab-Israeli War and ensuing oil embargo and “oil shock,” which saw a barrel of crude soar 300%, from $15.30 to around $61.10 (in 2019 dollars). And of course we had rising unemployment, stubborn “stagflation,” and the collapse of the so-called “Nifty Fifty” stocks. (Yep, I remember those!)

This time around, the big indexes aren’t all that far off all-time highs, and we’re not far from full employment (as the Fed defines it, at least), but we’ve got the U.S.-China trade war, spiraling geopolitical chaos, hyperpartisan dysfunction on a good day in D.C., and a potential bank liquidity crunch lurking under the surface.

And while Nixon was accused of implementing a cover-up of the Watergate burglary, the concern this time around is that the president may have withheld military aid – U.S. taxpayer dollars – to Ukraine in order to make that aid contingent upon a Ukrainian investigation of former Vice President and current Democratic presidential candidate Joe Biden and his son Hunter’s dealings in Ukraine – which is a whole ‘nother kettle of fish.

Let me be clear: I have no idea what happened and no opinion one way or another, so we’ll take that off the table. I simply don’t have the luxury of taking a partisan position in my capacity as Chief Investment Strategist.

I’m concerned with what traders from New York to Sydney are concerned with: What the heck does any of this mean for your money?

There Will Be Opportunity in the Chaos – There Always Is

I think traders will sell off ferociously if the impeachment proceedings move from fanciful conjecture and 2020 election posturing to the possibility of real transgressions.

Other than that, they will be a well-publicized sideshow characterized by unprecedented and exceptionally vicious headlines, name-calling, posturing, and finger-pointing – from both sides, to be clear.

That’s why you want to make sure you are constantly focused on protecting your profits and your capital. You do that by setting specific, hard profit targets and harvesting gains when you hit ’em. Conversely, you jettison the losers when they bump up against trailing stops you have in place at all times.

There’s never a great time to be sentimental about your stocks, but ruthless adherence to profit targets, trailing stops, and overall investing discipline will be critical in the weeks ahead.

Investors who don’t do that, who think, “Well, it hit my stop, but maybe if I just hang in there a little longer…” will be bulldozed, chewed up, spit out, steamrolled, and laughed at for good measure.

You don’t want to be “that guy.”

If you’re a paid subscriber to Money Map Report or High Velocity Windfalls, this should sound very familiar. We’ve been gradually tightening up both profit targets and trailing stops for months ahead of the possibility of more volatility.

If you’re not a Money Map Report or High Velocity Windfalls subscriber, you’re not out of luck. You can click on those links to learn how to subscribe, but you can also carefully review your all holdings (and I do mean ALL of ’em) right now with an eye on which ones you’re going to keep, which ones you’re going to sell if the markets force your hand, and, importantly, which ones you’re going to buy more of if the markets give you that opportunity.

Right now, I’m particularly interested in defense, medical technology, and traditional “Big Tech.” They’re the companies and sectors that can protect margins and grow despite the possibility of political turmoil. And, quite literally, I think that’s “worth” a lot at the moment.

The bull can continue to run – there’s plenty of support for still higher highs ahead – but we have to be prepared for some of the herd to step in the you-know-what when and if the stampede gets going!

— Keith Fitz-Gerald

Source: Money Morning