Mitch McConnell doesn't have the votes to block witness testimony and things could get really interesting for the Dow Jones.
There have been few high-profile political events that have had less of an impact on the Dow Jones than the impeachment of President Donald J. Trump. After a few early jitters, the stock market has almost entirely ignored the political process. The leaking of former National Security Advisor John Bolton’s manuscript changes this, as the Democrats might have made some headway after Mitch McConnell confessed that he no longer has the votes to block witnesses.
Interestingly, the significance for the Dow is not just the fact that John Bolton might be the smoking gun that Dems have been looking for. Instead, it is the fact that, according to Trump-ally Senator Lindsay Graham, if Bolton is called, then all bets are off, and they are calling “everyone.”
The implications of this could be significant, as one of the leading candidates for the Democratic nomination, Joe Biden could be called to testify on the corruption scandal that Donald Trump claimed to be investigating.
Anyone who has seen Biden on the debate stage has seen that he is not particularly dynamic, and his campaign team would be terrified of throwing him into an even more hostile environment. We have seen that his temper has often frayed, and Republican senators would revel in the opportunity to take some political pot-shots against him ahead of the 2020 election.
With Bernie Sanders already viewed in some polls as the front runner, such a set of circumstances could be especially useful for the Senator from Vermont. Given that there is plenty of speculation as to how devastating a Sanders’ victory could be for the Dow, Wall Street will likely have to make space for the impeachment saga in their list of concerns.
It is also not impossible to write off Trump’s removal from office anymore. The probability of the President being convicted is currently around 12%. This might not sound like very much, but if you consider that there is a 1 in 10 chance of the most powerful man in the world being removed from office, it starts to carry more weight. Should McConnell lose the vote, and respected Republican John Bolton take the stand, this percentage would probably rise even more.
Financial markets hate uncertainty, and while the coronavirus is the top storyline, anything that actually makes it worth paying attention to the impeachment trial could be significant for the Dow Jones.
It was a bumpy ride for stocks when Bill Clinton and Richard Nixon faced impeachment, mainly because there was no definite outcome as to whether they would be removed or not. Anything that makes Trump’s position less secure increases its relevance to the Dow.
Few presidents have ever tied the performance of the stock market so tightly to their own actions as Donald Trump. This makes his re-election probability extremely important to the fiscal outlook, particularly with the promise of more tax cuts on the way.
Should Trump and Joe Biden take a hit from the witness phase of the impeachment trial, the subsequent boost this gives to Bernie Sanders is going to be a serious thing for Dow bulls to consider.