Regardless of your political leanings, it is hard to deny that Michael Cohen’s guilty plea and Paul Manafort Paul John ManafortOur Constitution is under attack by Attorney General William Barr Bannon trial date set in alleged border wall scam Conspicuous by their absence from the Republican Convention MORE’s conviction spell bad news for Donald Trump.

The president will now need to contemplate new ways to insulate himself from sprawling investigations and new legal risks that may threaten his job. As this occurs, Wall Street has a lot at stake, whether it knows it or not.

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The Trump administration has been a true friend to the financial sector. From tax cuts to regulatory relief, the White House has waged war on red tape to keep profits high and markets at ease.

The Securities and Exchange Commission and Consumer Financial Protection Bureau have also dropped their “broken windows” enforcement strategies that previously spurred a spike in actions against banks, investment management firms and other market participants.

But the good times are now in jeopardy. If Cohen’s campaign finance violations and Manafort’s illegal Russian business dealings are smoke, President Trump Donald John TrumpSteele Dossier sub-source was subject of FBI counterintelligence probe Pelosi slams Trump executive order on pre-existing conditions: It 'isn't worth the paper it's signed on' Trump 'no longer angry' at Romney because of Supreme Court stance MORE may have been somewhere near the fire. The U.S. attorney in Manhattan and Robert Mueller Robert (Bob) MuellerCNN's Toobin warns McCabe is in 'perilous condition' with emboldened Trump CNN anchor rips Trump over Stone while evoking Clinton-Lynch tarmac meeting The Hill's 12:30 Report: New Hampshire fallout MORE’s investigative team are getting close to finding out if he, in fact, lit the match.

If you operate in the financial world, what may look like old fashioned Washington drama bears extra close watching for three additional reasons.

Political turbulence means market volatility

Although market participants have grown somewhat immune to President Trump’s tweeting and ad hoc policy directives, this week’s news marks the beginning of a period of tremendous turbulence.

Prolonged inquiries into the Trump presidential campaign can no longer be written off as witch hunts now that the U.S. attorney has Cohen cooperating and the Mueller prosecutors have proven their case against Manafort.

It is looking like a matter of when, not if, one of the investigations ultimately reaches the Oval Office. This is particularly monumental when one considers that President Nixon’s Saturday Night Massacre and Kenneth Starr’s report on President Bill Clinton William (Bill) Jefferson ClintonAnxious Democrats amp up pressure for vote on COVID-19 aid Barr's Russia investigator has put some focus on Clinton Foundation: report Epstein podcast host says he affiliated with elites from 'both sides of the aisle' MORE contributed to double-digit declines in the S&P 500 over the course of short periods during 1973 and 1998, respectively.

While other economic factors obviously existed during those time periods, political turmoil certainly impacted markets in meaningful ways.

Welcome back gridlock

It is very likely that the Trump administration’s domestic policy agenda is going to be de-prioritized for the foreseeable future. The president may try to score points with his base through additional protectionism measures and tariffs, but it is unlikely that the White House will continue devoting the time and resources required to accelerate its popular deregulatory initiatives.

Campaign promises related to boosting infrastructure spending, reforming health care and rolling back the Dodd-Frank Act are also certainly going to go unfulfilled now that Republicans in Congress must distance themselves from the White House. We could very well be entering a do-nothing period over the next two-and-a-half years.

A “blue wave” midterm cycle

Midterm election cycles are historically challenging for the political party that controls the White House — and that might be doubly true for Republicans in 2018. Many pollsters predict that Democrats and Independents will be extra motivated to turn out to vote and flip the House of Representatives as a referendum against President Trump. If this occurs, it will roil Wall Street.

A Democratically-controlled House would definitely pursue articles of impeachment. In addition, committees chaired by Democrats will use their subpoena power to investigate meddling in the 2016 election and even explore President Trump’s bank records and investment holdings.

This could all occur while Rep. Maxine Waters Maxine Moore WatersPowell, Mnuchin stress limits of current emergency lending programs Pelosi: House will stay in session until agreement is reached on coronavirus relief Omar invokes father's death from coronavirus in reaction to Woodward book MORE (D-Calif.) becomes chairwoman of the House Financial Services Committee and reinitiates hearings that put Wall Street firms under a scrutinizing microscope.

It is obviously impossible to predict exactly how much the president’s legal problems will impact investors and markets. Certain pundits are quick to remind us that the economy is humming along with steady growth, solid corporate profits and low unemployment.

But with interest rates rising and debt levels increasing in the late innings of a bull run, firms operating across the capital markets and financial sector still must anticipate — rather than react to — the political disruptions to come.

Greg Marose is director with Profile Advisors, a financial communications and public affairs firm working with asset managers, investment banks and various institutions.