will trump resign.jpg

What would US stocks do if President Trump suddenly resigned?

Last Wednesday, Convergex's Chief Strategist Nick Colas pondered on this question, "What would US stocks do if President Trump resigned?"

Here are his thoughts:

Based on recent price action the answer is clear: rally 3-5%, at least, over a day or two.  The reasoning here is simple.  US equities see through the headlines (like the Comey firing) and essentially believe two things.  First, corporate earnings are growing nicely.  Second, the Republican-led Congress needs to pass tax reform by the 2018 midterm elections.  As for who sits in the White House, markets will favor anyone who can push item #2 to a speedy conclusion while not screwing up #1.  OK – one more (half a) thing: long term interest rates are going nowhere, fast.  As long as markets believe those 2 ½ drivers remain in place, US stocks will (very) slowly grind higher.  And it isn’t just the market’s response to Tuesday’s headlines that make us say that.  Our monthly look at sector and asset price correlations supports the thesis.  Average S&P large cap sector correlations dipped in the last month and are averaging just under 60% YTD.  That’s a clean 20 points lower than the 2009 – 2016 experience and shows fundamentals now matter again.  But you don’t need a “Trump” card to play this game.

First of all, I think this is just a fun thought exercise because I don't think there is any chance that President Trump will resign.

In terms of Colas' view, I agree and disagree. I believe that if the president did resign, it would be a one to two day sell off, not a 3-5% rally, because it would cause significant shock and uncertainty in the markets -- two things that investors hate. Who wants to try and sort out the possibilities of a President Pence?

I do agree with Colas that strong earnings growth and low interest rates should continue to drive markets higher regardless of any political events. We were one of the first to pound the table last summer on a turn in corporate earnings and we continue to believe that growth trajectory should remain in place for the foreseeable future.

become_a_blog_subscriber

Share This Story, Choose Your Platform!

About the Author: Chris Wang

Chris Wang

IMPORTANT DISCLOSURE INFORMATION 

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Runnymede Capital Management, Inc.-"Runnymede"), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Runnymede.  Please remember that if you are a Runnymede client, it remains your responsibility to advise Runnymede, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Runnymede is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Runnymede's current written disclosure Brochure discussing our advisory services and fees is available for review upon request. Please Note: Runnymede does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Runnymede's web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.