How to trade Trump’s impeachment

There have been plenty of calls to impeach President Donald Trump throughout his presidency, stemming from alleged abuses of power, possible conflicts of interest, the fallout from the Russian hacking scandal, and more. But for now at least, the prospect remains unlikely.

However, if there’s proof that Trump has acted unlawfully – for instance if he facilitated collusion with Russia, or attempted to obstruct justice by blocking the FBI’s investigation into Russian hacking – then we could see the president impeached.

For Trump’s detractors, it’d be cause for celebration. But for the markets, the picture looks much more complicated. Here’s how to trade the fallout from a potential Trump impeachment.

When to trade Trump’s impeachment

Trump’s impeachment would likely involve months of inquiries and debate, providing plenty of opportunities for traders to react to developments and place trades in anticipation of price movements. The following events in particular are likely to be critical:

Announcement of evidence

Impeachment is enshrined in the constitution as the process by which charges can be brought against the president for ‘treason, bribery, or other high crimes and misdemeanors'. While this phrasing is somewhat ambiguous, what is clear is that some evidence of wrongdoing in one of these areas is required. The key, then, will be to look out for news that there is evidence against him and place any long-term trades at this moment.

It’s worth noting, though, that impeachment and conviction can only be achieved with majority votes in the House of Representatives and Senate respectively. These are both currently controlled by the Republicans, so the evidence would very likely need to be both politically damaging and ironclad to convince them to vote against their leader.

Bringing of charges to the House

Once there is evidence of wrongdoing, impeachment proceedings can be initiated by any authorised person – usually a member of the House. Alternatively, the House can pass a resolution to authorise an inquiry.

In either case there are two possible outcomes: the majority leader can either dismiss the case or put the impeachment charges to a vote. Whatever decision they make is highly likely to move the markets, so you’d need to be prepared to react quickly to their announcement.

Vote in the House of Representatives

Assuming charges are recommended by the majority leader, the next step would be a vote in the House of Representatives – where the president could be impeached on one or more of the charges by a simple majority.

The markets are likely to price in the expected result of such a vote ahead of time, so you may wish to pay attention to what high-profile Republicans are saying as a gauge of which way the pendulum might swing. Any difference between the expected and actual result could have a big effect on the markets.

Trial and vote in the Senate

If Trump is impeached by the House, he will remain in office pending a trial in the Senate, which could play out over several weeks. Removing Trump from office would require approval by a supermajority vote of two thirds or more, so pay attention to the evidence presented during the trial and how senators feel about the charges.

As before, the markets are likely to move in anticipation of the vote so any difference between the expected and actual result could have a big effect.

President’s resignation

Of course, it’s possible that Trump would rather resign from the $400,000-a-year position* than go through the rigmarole of impeachment proceedings and a trial. There is some precedent for this: Richard Nixon resigned after the White House tapes emerged, for example. Make sure you are ready to react quickly to the news, as a resignation is unlikely to be scheduled.