In many ways, 2019 turned out to be a historic year for both politics and S&P 500 futures. US stocks rallied to unprecedented heights and, for only the third time in history, the US House of Representatives impeached a US president.
E-mini S&P 500 Futures Drive Higher
On December 18, 2019, the US House of Representatives voted in favor of impeaching Donald J. Trump on two separate articles. Although broad in scope, the charges put forth formally outlined obstruction of justice and abuse of power. Each was upheld by the House of Representatives, which voted 230-197 and 229-198 “in favor of” each charge, respectively.
As a general rule, political uncertainty leads to market turmoil. Heavy volatility frequently develops during elections or an unplanned regime change, with buyers and sellers interpreting the events very differently. However, December 2019 proved to be an exception to this rule. March 2020 E-mini S&P 500 futures put in a solid month amid the fresh uncertainty, closing out what was a big year for US equities:
- December gains measured 85.25 points, a rally of 2.71 percent.
- As a whole, the S&P 500 Index rose almost 30 percent and routinely posted fresh all-time highs.
- Apple Inc. (AAPL) and Microsoft Corp. (MSFT) set the pace, each gaining 14.8 percent for the year.
- E-mini S&P 500 futures experienced robust participation, regularly trading over 1 million contracts per day on the Chicago Mercantile Exchange (CME).
The solid 2019 performance of the S&P 500 placed an exclamation point on the three-plus-year “Trump rally” in US stocks. Strong equities valuations became the norm, most of which was attributed to low unemployment, dovish monetary policy from the US Federal Reserve, and steady economic growth.
The robust performance of late-2019 set the stage for a strong start to 2020. January featured the S&P 500 rallying above 3200.00 and the Dow Jones Industrial Average cracking the 29,000 level on several occasions. Despite House impeachment efforts and the future trial in the US Senate, investors didn’t hesitate to pile onto the long side of American stocks.
Projecting 2020
At press time, the final chapter of the Trump impeachment saga has yet to be written. Nonetheless, the Senate trial is expected to be held in early 2020. Here are a few elements integral to the trial’s outcome:
- A two-thirds Senatorial majority must vote “in favor of” to convict Trump of either article.
- If Trump is convicted, his presidency ends, effective immediately.
- Opinion polls ahead of the trial painted a murky picture of potential outcomes. Eleven senators have publicly supported impeachment, 38 have publicly opposed the articles, and 51 have not yet made their opinion known.
From a practical standpoint, any upheaval in political leadership is likely to at least temporarily hamper US stock valuations. In the event that Trump is convicted by the Senate, Vice President Mike Pence will complete the term as president. Given the rapidly approaching 2020 general election, the scenario for Trump’s long-term predecessor remains largely unclear.
Although Trump is widely expected to be acquitted, E-mini S&P 500 futures are still likely to experience turbulence when the final verdict is announced. Any introduction of political uncertainty typically brings enhanced volatility; the impeachment hearings of 2020 will likely do the same.
Politics and the Markets
Without a doubt, politics is one of the key fundamental underpinnings of today’s US stock markets. The House impeachment of Donald Trump didn’t do much to stymie the strength of the equities markets, but it remains to be seen whether the Senate trial, the removal of Trump, or another type of shake-up will affect E-mini S&P 500 futures. Though the exact degree of change remains a mystery, short-term volatilities are all but assured.
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