M. Todd Henderson on How the Stock Market Would React if Trump Were Impeached
How would the stock market react if Trump is impeached? Economists weigh in
Political games in Washington typically don't matter very much on Wall Street.
The fundamental value of a stock is based on the cash that the underlying company is expected to generate over its lifetime, discounted to present value. Therefore, the value of the stock market is simply the sum of the values of all the individual stocks (or, for an index, like the Dow, the value of the stocks in the index). If businesses expect to make more money, more investors will buy than sell, driving up stock prices.
What's more, the probability of a political event like an impeachment is already baked into the stock price of every company. Markets (meaning buyers and sellers of stock) are constantly adjusting their estimates based on news of all kinds, whether it's about consumer demand for a particular product, tariffs, the president's latest tweet or even his impeachment. The prices of stocks today reflects these estimates.
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