Will Trump’s Fourth Indictment Trigger a Stock Market Crash?

This week brought the fourth indictment against Donald Trump. The former U.S. president faces 41 new charges. Brought forth by Georgia’s Fulton County District Attorney Fani Willis, they include multiple counts of “forgery or false documents and statements,” and “soliciting or impersonating public officers,” to name just a few. The latest indictment centers around Trump’s attempts to interfere with Georgia’s electoral proceedings during the 2020 presidential election.

The dates for his actual trial are not yet confirmed. But as the world waits for updates, one thing is clear: These unprecedented events will send ripples through the U.S. and beyond.

It’s no secret that major political shifts can have interesting impacts on the economy. During the 2022 midterms, I reported on how government gridlock can actually benefit the stock market. As we stand by and watch history unfold, it’s natural to wonder how it will impact our daily life.

This type of speculation often leads to fear, especially as unrelated events generate frightening headlines. But if you’re wondering if a stock market crash is likely to ensue from the Trump indictments, there’s no cause for alarm. In fact, legal action against him probably won’t impact any investment with the exception of stocks like Digital World Acquisition (NASDAQ:DWAC).

Smart investors who’ve avoided the Trump trades shouldn’t be too worried.

Trump’s Trial Won’t Lead to a Stock Market Crash

Equating Trump with economic matters makes sense. He built his 2016 campaign on the promise that he could restore the U.S. economy and bring back jobs. And while he has claimed to have done exactly that, data makes it clear that he inherited a strong economy and did little to help it.

On the contrary, evidence shows that his policies did significant damage to the economy he still aggressively touts. The nonpartisan Center for American Progress has conducted a detailed study laying out the ways in which his administration’s response to the Covid-19 crisis exacerbated it. These policy failures helped pave the way for the 2020 stock market crash.

By that logic, it’s natural to wonder what his pending trials will mean for financial markets. Wanting to learn exactly what investors should be expecting, I spoke to a few financial experts about Trump’s indictments. Three different sources issued similar takes, noting that while the indictments are certainly important, they aren’t likely to mean much for the financial sector, at least in the short term.

Interactive Brokers Chief Strategist Steve Sosnick stated that he doesn’t see the latest indictment posing any real impact on the stock market. In his words:

“The first three indictments haven’t perturbed the markets, and while this might turn out to be the most consequential in the long run, it is important to remember that this will take a minimum of several months to resolve. Equity markets are very adept at putting aside developments that don’t directly impact earnings, sales, cash flows, etc.  The indictment is a highly consequential news item, but not for markets.”

Robert Johnson, Chairman and CEO at Economic Index Associates, made a similar case. As he sees it, most of Wall Street saw Trump’s fourth indictment coming. For that reason, he sees it as an insignificant event for capital markets, despite its wide-ranging political implications.

“What is driving financial markets is the outlook for the economy and the likely future path of interest rates,” Johnson told InvestorPlace.

Worst-Case Scenario

While it’s clear that investors shouldn’t be too worried about Trump’s indictments leading to financial disaster, I still wanted to discuss what to do if the unlikely occurs. Kavan Choksi is a noted wealth manager and investor with experience across multiple sectors. He currently serves as managing director of self-founded firm, KC Consulting.

Like Sosnick  and Johnson, Choksi doesn’t see the Trump indictments pushing financial markets down in the short term. But he laid out what investors should do to prepare if the tides change and Trump’s trial pushes the U.S. toward a stock market crash. As he states”

“If an unprecedented announcement or finding unfolds during the indictment trials, individuals should consider taking a closer look at their portfolio and determine if their investment could be impacted by any connections to the indictment news or not. Otherwise, investors should continue to keep a pulse on market indexes and economic indicators to make informed decisions about where to invest in the financial markets.”

It’s understandable that investors might be worried about what Trump’s indictments could mean for their holdings. But it’s clear that very little damage, if any, is likely.

It wouldn’t be out of character for Trump to claim that his arrest could cause the collapse of the U.S. economy. But actual business experts have made strong cases for why such a scenario is highly unlikely. Only the Trump trades are likely to suffer as his impending trial draws closer.

On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Samuel O’Brient has been covering financial markets and analyzing economic policy for three-plus years. His areas of expertise involve electric vehicle (EV) stocks, green energy and NFTs. O’Brient loves helping everyone understand the complexities of economics. He is ranked in the top 15% of stock pickers on TipRanks.

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