Wall Street has seemed resolute in believing that President Donald Trump can win re-election in 2020 – but Greg Valliere, chief U.S. political strategist for AGF Perspectives, said that the results of Tuesday’s state and local elections should call their faith into question.

“It looks a little ominous for Republicans and Donald Trump,” said Valliere on Wednesday to an audience of financial advisors at the 2019 Schwab IMPACT conference in San Diego.

In Virginia, both houses of the state legislature went Democratic, and in Kentucky, conservative governor Matt Bevin lost his re-election bid to a Democratic challenger even after a last-minute campaign rally with Trump where the president declared the gubernatorial election “a referendum on impeachment.”

“Until last night, the prevailing view on Wall Street was that (Trump) was the clear favorite, but I think people are going to waver today,” said Valliere.

Valliere also pointed to negative trajectory in the polls for the president, with leading Democratic challengers Joe Biden, Elizabeth Warren and Bernie Sanders all polling ahead of Trump by double-digits in the most recent national head-to-head polling by the Washington Post.

The 2020 election could come down to three key states that Trump narrowly won in 2016: Pennsylvania, Michigan and Wisconsin. If a Democratic challenger can win in those states, Trump’s path to re-election becomes nearly impossible.

But, working to Trump’s advantage, the Democrats are mounting a “pretty weak” primary field, said Valliere, with clear problems with the two primary front runners, Biden and Warren.

Biden “seems to have lost a step,” said Valliere. “Sometimes, the words don’t come out right… everyone will be looking really carefully at the next two debates to see how sharp Biden is.”

Warren, on the other hand, had a very good summer as she ascended in national polls as well as those in the early primary states, but “may be too polarizing,” said Valliere, and a lot of her policy proposals and plans are “not credible.”

“A lot of the Democrats I talk to say ‘is there anybody else,’” said Valliere, who added that he thinks it’s unlikely that a last-minute candidate like Hillary Clinton, Michelle Obama or Michael Bloomberg jumps in.

Washington is “stimulating like crazy” with lower interest rates, lower taxes and increased spending, said Valliere.

“It’s naïve to think that the Fed is not aware of the Trump tweets,” said Valliere. “I think he at least has a subliminal impact on their thinking. I think the Fed remains remarkably accommodative.”

And the current amount of fiscal stimulus, with a $1 trillion-plus deficit, is “unprecedented,” said Valliere. Both political parties are behaving “like Keynesian drunks.”

But all that fiscal stimulus will result in tepid GDP growth of 1.5% to 1.75%, said Valliere, “not what the President was looking for, but he may be stuck with that.”

Any readings of Trump’s re-election chances are clouded by the dominant narrative in American politics: impeachment.

“I do think he will get impeached before Christmas by the House,” said Valiere. “I give it an 80% chance. Evidence keeps piling up and piling up – but the big story is the Senate trial. It’s going to be very difficult to get 66 Senators to vote to convict – it means you need at least 20 defections among Republicans… I don’t think the votes are going to be there.”

But Republican sentiment on impeachment may shift if the polls change and their majority in the Senate appears at risk, said Vallliere, because Senate Majority Leader Mitch McConnell and others see the Senate as the ultimate firewall against liberal policy from the House of Representatives and a potential Warren or Sanders presidency. The Senate has also opened up a pipeline of new, young, conservative judges that McConnell will not want to risk.

Even if Trump is impeached, he can still prevail, said Valliere, but Republicans might want to pay closer attention to the possibility that they will lose the Senate.

“Right now it’s 53 Republicans and 47 Democrats, and based on my sense, the Republicans will keep the Senate,” said Valliere. “That’s crucial for the markets: if Warren or even Biden should win and both houses turn Democratic, then you have to worry about Medicare for all and a lot of legislation that might not be market friendly.”

Outside of elections, Valliere also said that he is concerned about rising geopolitical risks surrounding trade, Brexit, the Hong Kong protests and especially the Middle East.

“Do the Iranians feel emboldened now that we have a president that is unabashedly an isolationist?” he asked. “Do they go after a Saudi oilfield?

"It’s a wild year coming up – I always say it’s important to focus on the fundamentals. Much of the chaos and dysfunction in my city is background noise – it’s not as important as earnings, the federal funds rate or the GDP – but the next few months will be exceptionally volatile, even by my Washington standards.”