Yahoo Finance Markets will have to grapple with Trump again
Supporters of former President Donald Trump are threatening mayhem, now that the federal government has charged him with 37 criminal counts related to classified national-security documents he took after leaving office, and apparently shared with others. The threats obviously evoke the specter of January 6, 2021, when hundreds of Trump supporters unhappy with his 2020 election loss stormed the US Capitol.
Anybody remember what the stock market did that day? The S&P 500 rose 1.5% and hit a new record high. As alarming as the violence in Washington was, the day ended with Congress affirming Joe Biden’s presidential victory and traders looking past the Trump-induced havoc. Trump was on his way out, and investors no longer had to figure out how to price his antics.
Trump has now been out of office for 28 months, and many Americans have chronic Trump fatigue. The federal indictments unsealed on June 9 had no impact on markets. Nor did the New York City district attorney’s April 4 indictment of Trump on 34 counts relating to something completely different. It will probably be the same if a Georgia grand jury indicts Trump on election-fraud charges later this summer, as seems likely. A lot of people conflate all the charges against Trump into one giant ongoing battle pitting the blob of American justice against America’s most artful dodger.
But markets will most likely have to grapple with Trump again. For one thing, there’s no reason to think mounting criminal charges against Trump will knock him out of the race. He has vowed to keep campaigning, even if it means juggling multiple criminal trials with the demands of running for president.
For another thing, most Republicans voters don’t seem to care about the charges against Trump, as if they long ago accepted the possibility he could end up a convicted felon. Polls show Trump is the decisive leader among Republican presidential candidates, and his standing among Republicans actually ticked up following news of the federal indictments.
Trump’s legal woes could make the 2024 Republican primaries a next-level circus. The federal criminal case against Trump is more serious than the New York City case, with jail terms for each charge ranging from 5 to 20 years. Legal analysts also say it’s a strong case with a clear narrative, compelling evidence of Trump’s guilt, and no arcane legal theories for jurors to decipher. If a jury convicts him and appeals courts uphold it, jail time seems certain, barring a presidential pardon.
The timing of the federal trial is likely to collide head-on with the political calendar. It normally takes well over a year to complete a federal trial once charges are filed, and it’s in Trump’s interest to use delay tactics to drag it out as long as possible, ideally after the elections in November 2024. On the other hand, by filing the case in Florida, where Trump now lives, rather than in Washington, DC, special counsel Jack Smith may have avoided a lengthy legal battle over venue. South Florida is also known for relatively speedy trials.
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There are four possibilities on timing. The most favorable to Trump is that the trial doesn’t even begin until after the November elections. If it starts sooner, the trial could be underway but not concluded come Election Day on Nov. 5, 2024. If a trial happens quickly, it could be over by Election Day, with sentencing still undetermined if Trump is guilty. The speediest and probably most unlikely outcome would be a finished trial with sentencing, in the event of Trump’s guilt, though that would undoubtedly be subject to appeal.
Markets had a lot to sort out when Trump ran for president in 2016, and to a large degree they got it wrong. As a candidate in 2016, Trump favored sweeping tax cuts and deregulation, which investors typically applaud, along with import tariffs and tough new protectionist measures, which markets hate. The market, like most pollsters, guessed that Hillary Clinton would win in 2016.
On Election night, Nov. 8, 2016, overseas markets and US futures nose-dived after it became apparent Trump was likely to win. But markets recovered the next day, with the S&P 500 up more than 1%. Sectors likely to be impacted by policies Trump had espoused yo-yoed by much more.
Stocks broadly rose during Trump’s first three years in office, before the COVID pandemic caused worldwide distortions in financial assets. But markets endured a lot of indigestion from 2017 to 2020, largely because of Trump’s trade war with China and other nations and the tariffs that went up in both directions. Trump’s frequent attacks on the Federal Reserve certainly didn’t help.
If Trump is the Republican nominee in 2024, pricing in his policies could be more of a black box than ever. The Trump tariffs on Chinese imports are still there, so that’s one thing that might be settled. But other Trump offerings for 2024 could be even more consequential. He could end all American support for Ukraine in its war against the invading Russians, which would cleave the NATO military alliance and roil global energy markets. Trumps wants to dismiss much of the federal bureaucracy, as part of his “deep state” vendetta against civil servants he charges with disloyalty.
If Trump wins, it could happen in the midst of a federal trial that could send him to jail. What if there’s a conviction before Election Day, or during the lame-duck period between November and January? Could Trump take office on January 20, 2025, and find a way to overturn his own conviction? Then there’s the farcical prospect of Trump governing from prison. Would the rest of the government even listen to him? These scenarios seem silly to the point of absurd, but Trump may force the adoption of even stranger boundaries than he has up till now.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman
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