Former President Donald Trump’s indictment Tuesday on charges out of Special Counsel Jack Smith’s Jan. 6 probe is considered a “nonevent” to the U.S. market among financial experts, who argued Wednesday morning’s losses were not driven by the news dominating political and media circles.
“A fundamental market tenet is that market prices are based on expectations, not realizations. The Trump indictment was widely anticipated, so while a seismic event politically, it really isn’t a major event with respect to capital markets,” Robert Johnson, a finance professor at Creighton University’s Heider College of Business, told The Hill.
The indictment, filed shortly after 5 p.m. in Washington, D.C., charges Trump with conspiring to defraud the United States, conspiring to disenfranchise voters, and conspiring and attempting to obstruct an official proceeding. In a video address afterward, Smith categorized the Jan. 6, 2021, Capitol riot as an “unprecedented assault on the seat of American democracy” that was “fueled by lies.”
“It can be said that the market weathered [Jan. 6] very well, but how the democracy weathers that is an entirely different question, which does have huge implications for our economy and standard of living in this country,” Mark Hamrick, senior economic analyst and Washington bureau chief at Bankrate, told The Hill.
Meanwhile, JJ Kinahan, CEO of IG North America, the parent company of the brokerage tastytrade, told The Hill that Trump’s Jan. 6 indictment was a “nonevent” for the market.
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“The market is much more concerned with the downgrade of the U.S. by Fitch,” Kinahan said.
The capital market company Fitch downgraded the U.S. to AA+ from AAA on Tuesday, citing “fiscal deterioration over the next three years and repeated down-to-the-wire debt ceiling negotiations that threaten the government’s ability to pay its bills,” according to Reuters.
Richard Francis, a senior director at Fitch Ratings, told Reuters on Wednesday that downgrade was partially fueled by political polarization reflected partly by the Jan. 6 riot.
“It was something that we highlighted because it just is a reflection of the deterioration in governance, it’s one of many,” he said. “You have the debt ceiling, you have Jan. 6. Clearly, if you look at polarization with both parties … the Democrats have gone further left and Republicans further right, so the middle is kind of falling apart basically. … We don’t fault one party or the other for the fiscal situation.”
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Speaking with Yahoo Finance on Wednesday, Michael Arone, State Street Global Advisors chief investment strategist for the U.S. SPDR business, argued that markets will “mostly ignore” Trump indictments until closer to the election.
“Until we get more clarity in terms of the implications of the outcome here, I think the market will mostly ignore a lot of the politics,” he said. “The top two stories that you had this morning, the markets mostly shrugged both of them off, the downgrade and the Trump indictments.”
Fitch’s move follows a similar one by Standard & Poor’s in 2011, one that coincided with a European debt crisis to help cause stocks and bonds around the world to swing violently. So far, this most recent downgrade has caused less dramatic ripples of fear.
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Stocks were falling Wednesday as Wall Street loses more momentum following its torrid run so far this year. The S&P 500 was 1.2% lower in afternoon trading and heading for a second straight loss after hitting a 16-month-high. The Dow Jones Industrial Average was down 276 points, or 0.8%, at 35,357, as of 1:15 p.m. Eastern time, and the Nasdaq composite was 2.1% lower.
The Associated Press contributed to this report.