The sellside desk chatter about the likelihood of Trump being impeached picked up notably earlier this year but ultimately subsided as it became clear that absent some kind of definitive proof of collusion, the near-term risk was low.
Well, we might have gotten something in the way of that “definitive proof” on Tuesday as Donald Trump Jr. was forced to release potentially incriminating e-mails ahead of a NY Times story that was set to bring them to light.
Stocks recovered from an initial swoon, but it’s been no such luck for the dollar:
The dollar declined versus most it its G-10 peers, alongside a drop in U.S. equities and Treasury yields, after Donald Trump Jr. released emails related to a meeting last year with a Russian lawyer. Trump Jr. acknowledged that he was told before the meeting that the lawyer had potentially damaging information on Hillary Clinton that came from officials in Moscow as part of an effort to help his father’s presidential campaign. The Bloomberg Dollar Spot index declined as much as 0.2 percent, falling for a second straight day. Meanwhile, markets are awaiting congressional testimony from Federal Reserve Chair Yellen Wednesday as attention remains on central banks and their relative standings in a global shift toward policy normalization.
After the email release, UST 10Y yield dropped to a fresh low for the day at 2.353%, and the S&P 500 slid as much as 0.6%; separately, Fed Governor Lael Brainard said she backs balance- sheet runoff “soon” while signaling she’s in no rush to raise rates further.
And so, as markets weigh the potential fallout, analysts are starting to chime in.
Up first is Citi’s Tina Fordham, who is out with this on Tuesday afternoon:
Today’s release of a series of emails by Donald Trump Jr., President Trump’s son, and the subsequent reaction by financial markets and in the news media has again highlighted one of this year’s key political risks: concerns about durability of the Trump Administration, and its ability to pass the pro-business legislative agenda that had underpinned investor confidence earlier this year.
We have long been skeptical about the “Trump Bump”, partly based on our view that the investigations undertaken by the FBI Special Prosecutor over collusion allegations could distract the Administration, but mainly due to our expectation the Congress would find it difficult to reach agreement quickly. But we have emphasized that we regarded impeachment as unlikely, for various reasons. These include the vagueness of the process and indeed the absence of evidence of “high crimes and misdemeanors”, as the US Constitution underscores.
But the primary logic behind our view that impeachment is unlikely during this Administration has been quite simply the political, rather than legal, nature of the impeachment process, and the reality of the US political math: Congressional Republicans hold a majority. With this in mind, despite remarks from senior Congressional Republicans suggesting unease with the Trump Administration, it would be highly unusual and indeed likely politically costly to the party’s electoral prospects to pursue impeachment proceedings against a president of their own party, particularly with Midterm elections a little over a year away.
Do these most recent developments, which suggest that key Trump advisers, including his son Donald Trump Jr. and son-in-law Jared Kushner met with a Russian lawyer (who had previously lobbied in Washington against the 2012 Magnitsky sanctions act), change the potential for impeachment? It is of course too soon to say, but we believe the risk of impeachment proceedings is now higher than before, even if still not our base case for the reasons cited above.