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The Donald Trump punt: the latest fashion in gambling

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For those who consider themselves experts or even gifted  amateurs on United States politics, there are opportunities to punt on that knowledge. The easy way is to sign up to a corporate bookmaker such as Paddy Power that is offering products like "Trump Impeachment Specials".

The odds move around, but earlier this week they were peaking at a 60 per cent likelihood Trump would come undone. If you feel confident enough to get really clever about it, you can further focus the bet (and improve your odds) by picking in what year this will happen (this year is the favourite) and nominate what he will be impeached for: perjury, treason, tax evasion or bribery.

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The other way to play the odds is to play the equity market, the debt markets or even the foreign exchange market.

This is certainly a more hazardous way to make money. Plenty of investors lost this bet in the lead up to US election last year. Most thought Trump would lose, so they got that wrong. And most predicted a Trump victory would damage the stock market. History shows the opposite happened and world markets experienced the Trump bump. So wrong again.

This week, world stock markets are again trying to evaluate, firstly, if Trump is really on the ropes and, secondly, what the impact of Trump being turfed from the White House will mean for market sentiment.

While most of the sell off in stocks on Wednesday centred on the fallout from allegations that the President asked then Federal Bureau of Investigation director James Comey to end an investigation into the former national security adviser Michael Flynn. The New York Times declared that the documentation of Trump's request was the clearest evidence that he tried to directly influence the Justice Department and FBI investigation into links between Trump's associates and Russia.

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The resultant 1.8 per cent plunge in the US stock market – which infected most other world indices – was, however, put down to fears over Trump's economic agenda of lowering tax cuts, shredding corporate regulation and boosting infrastructure spend.

For the most part, commentary was has not focused on Trump actually being forced to leave the White House.

However, the world's largest hedge fund Bridgewater Associates bravely attempted to wade in, telling its clients on Wednesday that impeachment could result in a 10 per cent fall in US stocks.

It included in its advice the caveat that it was not an expert on US politics and nor was it suggesting Trump would be impeached. It was just citing those bookmaker odds.

Bridgewater was among the majority that, before the election, predicted a sharp sell-off in markets should Trump win.

But the group, which manages $US150 billion ($202 billion), now estimates the result of a Trump turf will be enormous:  "an 11 per cent drop in US equities" plus a 12 per cent drop in European equities, a 16 per cent drop in Japanese equities, a 0.8 per cent drop in US 10-year yields, a 14 per cent increase in the price of gold and a 16 per cent move in the Japanese yen/US dollar.

In other words, an unwinding of the Trump trade that has dominated world markets since his election.

There is no doubt an impeachment would usher in a huge measure of uncertainty.

But if business is more concerned about the abandonment of all those pro-corporate policies, it should feel reassured that Trump's deputy, Mike Pence, has demonstrated he has a very similar agenda.

It should also take some comfort in the fact that most of the Trump uncertainty-led fall in US stocks on Wednesday was shrugged off on Thursday on the release of a number of positive pieces of news on the US economy, which refocused investor attention on the likelihood of the US Federal Reserve pushing up interest rates.

Then there are those such as AMP chief economist Shane Oliver who think the whole notion of the Trump trade is perhaps misguided.

"The standard narrative at present seems to be that the 'Trump trade' has driven the surge in global share markets since the US election and that this will now reverse because of the political crises now surrounding Trump," Oliver said. "This is too simplistic and likely to be wrong.

"First, the main reason for the rally in sharemarkets since last November has been the improvement in economic conditions and surging profits that has occurred globally and not just in the US and which had little to do with Trump.

"Second, the political crisis around Trump won't necessarily stop the pro-business reform agenda of the Republicans. In fact, unless things become terminal for Trump quickly, it's more likely to speed it up."

If the experience of Trump's presidency is any guide, it looks pretty likely that Trump's self-propelled roller-coaster won't be coming to an end any time soon and maybe it's time to place those bets.

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