President Donald Trump is a proud man. Certainly, his tendency to brand everything with the ever subtle TRUMP name would testify to this. That’s why all this talk of Trump resigning sounds like it would go against the very fabric of what makes the president tick. You would almost expect that he would have to be forcefully removed from office before he would ever willingly leave
But it would be more than a bit ironic in the face of his famous catchphrase “You’re Fired!”.
Despite this, recent pressure from the fallout of the James Comey firing, the spectre of the ongoing investigation into the ties between Russia and the Trump administration and the obstruction of judicial proceedings has ignited speculation that the President will be pressured into moving on. In any case, since Congress ultimately decides on matters of impeachment, it is unlikely that a Republican Congress would turn on its sitting president. Until midterm elections anyway, when the Democrats will have the chance to change the balance of power.
Still, assuming that he is forced or chooses to leave, what are the markets likely to do?
The situation depends on a few factors, most notably the circumstances surrounding the reason for Trump to leave office. But there are a few elements that are likely to be significantly impacted assuming he is either pushed or jumps.
The first is the state of the US dollar. The US dollar is generally considered a haven currency, due to the strength and size of the US economy. Many, if not all countries have large stores of US currency to provide stability. If there are concerns from central banks about the ability of the US economy to function, or a breakdown in government, there is likely to be a sell off as central banks try to stabilise their reserves.
There is much conjecture about the state of the US Stock market should Donald Trump leave office. US stocks have been performing well this year, with the S&P up over 8% since the beginning of the year. Ongoing political instability will create volatility in the markets, likely putting downward pressure on US shares. There is some sentiment that the market is currently skittish and undervalued because of concerns about the President. The theory that he may be holding the market back is interesting, but it is hard to quantify how if and to what extent this is the case. Although if there is a president in recent memory that would worry the markets due to his unpredictability, it would certainly be the current president.
But it seems surprising that the markets would view Donald Trump as anything other than a real estate mogul, and billionaire turned politician. Indeed, his tax incentives schemes and actions to repeal parts of the Dodd- Frank bill paint him in this light. Even his staunchest critics would struggle to defend the notion that he would not be perceived as heavily pro-business.
In any case, if Trump leaves and the dollar depreciates, this will make foreign investment in the US more attractive, creating upward pressure on shares. Initially, the stock market will follow the fortunes of the dollar, as people look for safety. Should there be a steep drop in the dollar, it will likely take until the dollar stabilises before the share market shows signs of recovery.
In the meantime, the markets will be a watching the obstruction of judicial proceedings and have one eye firmly focused on understanding President Trump’s potential impact for the future.Get the 5 most predictable currency pairs