An impeachment inquiry against Donald Trump was initiated on September 24, 2019 by Nancy Pelosi, the Speaker of the United States House of Representatives, in a televised speech. The inquiry was announced in the wake of an anonymous whistleblower report that alleged abuse of power, and then cover-up by US President Donald Trump during his presidency. For the fourth time ever in American history, the House of Representatives has launched an impeachment inquiry into a sitting president.
Robert Triest, the chair and professor of the Northeastern University’s Department of Economics believes, “It is difficult to determine the reasons for movement in the stock market. Uncertainty can lead to volatility in the market, he notes, but in this case, the launching of a formal inquiry should have been anticipated.”
According to Triest, the impeachment inquiry could contribute to a downturn by increasing uncertainty about future economic policy. Again, economic fundamentals are still pretty good. Thus, some of the risk factors are related to policy uncertainty. For instance, the uncertainty about how long the trade war will persist, and how that will evolve. When asked if historical precedents that can help forecast what may happen to the economy, Triest pointed out to the economy which did quite well during the Clinton impeachment process, which was part of the late 1990s boom. The political uncertainty regarding Clinton’s impeachment didn’t weigh heavily on the economy but in Nixon’s case, he ended up resigning.
Triest again points out that if the value of stocks goes down, it will affect people who don’t have money invested in the markets. However, there are two different channels. Firstly, the drop in the market will have some impact on aggregate economic activity, to the extent that the Federal Reserve is not able to fully offset that through monetary policy. This will affect job opportunities for young people. The second is favorable. Suppose that the stock market is overvalued and young people don’t have much in the way of anything invested in the stock market. Thus, if the stock market comes down, it will help them to buy stocks at a cheaper price.
Shahjadi Jemim Rahman