As President Donald Trump finds himself implicated in federal crimes by his former lawyer Michael Cohen, his chances of impeachment have surged — at least according to one source.

The odds that Trump will get impeached during his first term climbed to 45% on Wednesday, the highest in three months, according to data from PredictIt, the “stock market for politics” that allows users to bet on various goings-on in Washington.


In an appearance on Fox News on Wednesday, Trump was quick to dismiss the possibility of impeachment, which could increase further if the 2018 midterm elections see control of Congress returned to the Democrats.

He even went as far as to offer a stern warning— one that should have investors everywhere feeling unsettled.

“If I ever got impeached, I think the market would crash,” he told Ainsley Earhardt of Fox News. “I think everybody would be very poor. Because without this thinking [points to head] you would see, you would see numbers that you wouldn’t believe in reverse.”

If it’s any consolation, JPMorgan is skeptical of an impeachment, noting that Trump’s approval rating has remained largely unchanged amid the increased pressure.

Further, the firm says it would be impossible to reverse the fiscal stimulus — such as the unprecedented GOP tax law— that’s already been implemented. And considering that’s been the biggest driver of corporate earnings growth and, by extension, share gains this year, US stocks should still hang tough.

However, JPMorgan thinks some areas of the global marketplace could be thrown out of whack by the mere possibility of impeachment — and the long, drawn-out process that’s historically accompanied it.

The firm is watching Trump’s trade agenda particularly closely, referring to it as the “main wildcard” in any impeachment proceedings.

The way they see it, things could unfold in one of two ways:

  1. Trump relents on tariffs, which would spur a reversal rally in cheap, under-owned emerging-market (EM) assets that have gotten crushed in recent months
  2. Trump doubles down on tariffs, perhaps in an attempt to distract from domestic politics

The lingering possibility of the second outcome prevents JPMorgan from recommending a broad overweight position on EM. The firm says that, unfortunately, it’s not the “low-worry hedge to a tortuous impeachment process.”

JPMorgan also notes that, in the unlikely event that Trump is ousted, it’s unclear whether Vice President Mike Pence would continue along the same confrontational path deeper into a trade war.

So what’s the ultimate hedge for a market maligned by so much uncertainty? JPMorgan says “tactical insurance” can be best achieved by owning reserve currencies like the Japanese yen and the euro.

The firm says you can’t go wrong with this approach, considering “how consistently these perform during various types of US political stress, and Japan/Europe’s low priority on President Trump’s trade agenda,” John Normand, JPMorgan’s head of cross-asset fundamental strategy, wrote in a client note.

“Although our FX strategists have been long JPY for several weeks as a hedge on US-China trade conflict, reserve currency exposure seems one worth considering even as the Fed cues up a September rate hike, as US politics will probably become the dominant market preoccupation after Labor Day,” Normand continued.


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