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New York (CNN Business)Wall Street could learn to love a President Pence.
At least thats what Raymond James thinks. The investment firm predicted that the bull market would keep going in the unlikely event that President Donald Trump decides to call it quits.
Trump has become so erratic and unpredictable that its annoying for the markets.
Greg Valliere, chief US policy strategist at AGF Investments
After the initial shock, we think the market rallies as Pence is a predictable, traditional, conservative choice, Raymond James wrote in a report that published Wednesday evening.
The firm stressed that Trump resigning is a low probability event because hes known for not backing down from fights and would not want to validate allegations of wrongdoing.
But its not an insane idea. Raymond James says its possible Trump decides to resign because he wants to avoid going down in history as just the third president to ever get impeached (or, potentially, the first to be removed from office). And thats what at least one former Trump insider predicted. Barbara Res, a former Trump Organization vice president,told CNNs Brian Stelterearlier this month that her gut instinct is that Trump will resign.
The chance of Trump quitting during his first term is roughly 20%,according to PredictIt, a prediction platform that lets traders bet on political outcomes. Thats not nothing.
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Chris Meekins, one of the Raymond James analysts who authored the research, told CNN Business on Friday that the catalyst for writing the report was the fact that it kept coming up in conservations in Washington, DC.
Independently, different people associated with Trumps orbit brought this idea up unsolicited, Meekins said.
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Its impossible to say with any certainty how the stock market would react to a Trump resignation. In the long run, market performance isnt driven by politics. Its determined by how fast the economy and corporate profits are growing.
Recall that many experts predicted a market calamity if Trump was elected. That turned out to be true, for all of a few hours. Stock futures initially plummeted on the night of the 2016 election, but after the shock wore off investors loudly cheered the business-friendly parts of Trumps agenda, especially tax cuts and deregulation. The Dow spiked from just above 18,000 on Election Day to 26,000 by early 2018.
Trump himself has mused about how the market would react to his ouster.
In September,Trump arguedthe markets would crash if he was impeached.
Do you think it was luck that got us to the best Stock Market and Economy in our history. It wasnt, Trump tweeted.
But the markets love affair with Trump ended long ago.
TheS&P 500is only up modestly over the past six months. Thats because after securing massive corporate tax cuts and cutting regulation, Trumps economic agenda has turned less business friendly. The erratic US-China trade war isslowing global growth, disrupting global supply chains, raising costs for businesses and consumers andcrushing the manufacturing industry.
Raymond James argued that drug makers, defense contractors and companies linked to trade with China would benefit from a Trump resignation if there is a belief that it hurts the Democrats chances of winning in 2020 or shores up support for the Republicans keeping control of the Senate.
Visual:Stock market performance by president, from Reagan to Trump
The markets can live happily with Pence, on trade in particular, said Greg Valliere, chief US policy strategist at AGF Investments. Pence would get along far better with the Chamber of Commerce and the free trade advocates. Hed shy away from tariffs.
Valliere stressed, however, that he doesnt believe Trump will quit, especially because doing so could increase his legal jeopardy. (Justice Departmentpolicy counsels against indicting a sitting president,though a president can be indicted once out of office.)
Meekins, who said the report was one of the firms most widely read in recent memory, said a President Pence would bring back a sense of calm.
It creates some certainty, which the market historically craves, he said. Some investors have reached out saying, Weve been talking about this for months and were glad you finally raised it.
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By definition, Trumps volatile, tweet-first style makes it difficult for investors and CEOs to plan for the future.
At any moment, there could be a tweet coming out that changes a position. There isnt the traditional policymaking process, Meekins said.
Analysts at JPMorgan Chase evencreated an index to track the impact of Trumps tweetson interest rates. The bank found that Trumps tweets havesignificantly increased volatility.
Trump has become so erratic and unpredictable that its annoying for the markets, said Valliere. Pence is a boring, conservative, pro-business Midwesterner.
Valliere noted that Pence has similarities with another pro-business Midwest conservative: Gerald Ford, who became president in 1974 when Richard Nixon resigned rather than face impeachment.
The similarities with Ford are striking, Valliere said.