The House of Representatives voted along party lines last week to formally begin the impeachment process of President Donald Trump.

Investors should note the following crucial aspects. First every Republican voted against the resolution, demonstrating the iron grip that the President maintains on the Republican Party.

Second, all but two Democrats supported the impeachment resolution, making the procedure look starkly partisan. This could come back to bite the Democrats. As the President stated in his 2016 campaign, he could shoot someone on Fifth Avenue and his base would stay with him. A “perfect” phone call is much less damaging politically than a shootout on Fifth Avenue.

While the vote shows that the Democrats are committed to the process, and the high likelihood of a vote to impeach by yearend, the unanimous Republican caucus shows the near impossibility of Senate Democrats gaining the 20 Republican votes they would need to convict. A Senate conviction would require two-thirds majority (67) in a chamber where Republicans are the clear majority, with 53 seats.

Federal Government Budget

Despite the Nationals victory in the World Series, attention in Washington, D.C. is on the House impeachment action, but this focus could cause a challenge later in the month as Congress and the President must agree how to fund the government past the new fiscal year deadline of November 21.

There have been talks, and one Senate vote, to try to come up with a strategy to avoid a government shutdown on November 21 when the current Continuing Resolution (CR) expires. Congressional leaders are now looking at another CR that would likely run to the Christmas holiday break. While there is some talk of a CR running until February, the consensus is to keep the pressure on to finalize a FY 2020 spending plan.

As always, the wild card is the President. There are concerns that a government shutdown would force House Democrats to deal with the emergency and take their focus off the impeachment proceedings. Furthermore, one of the key points of disagreement is funding of the wall, a favorite topic of the President.

China Trade

All reports indicate the US and China are moving towards a Phase One trade deal this month, which should be supportive of equities. The latest hitch was the cancellation of the November 16/17 APEC meeting in Chile, where the President and Chinese leader Xi Jinping were to meet, due to riots in the capital, Santiago. However, talks continue as to a time and place for a new meeting location.

Impeachment Moves Forward; Federal Budget Battle Ahead
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