What Trump's Impeachment Inquiry Means for the Market
President Trump’s impeachment proceedings will get all the attention, but the economy matters more for the stock market, if history is a guide.
President Donald Trump’s impeachment proceedings will get all the attention, but the economy matters more for the stock market, if history is a guide.
It’s official: Months after Speaker of the House Nancy Pelosi announced that the House of Representatives will open a formal impeachment inquiry into President Donald Trump, public hearings are set to begin at 10 a.m. on Wednesday. Being market reporters, we’ll leave the punditry to Fox News, CNN, and the rest. What we care about is the impact on the stock market, and from what little information we have to go by, impeachment doesn’t seem to be high on the list of concerns.
We don’t have a lot of examples to go by. Andrew Johnson was impeached—but not convicted—in 1868, and while I’m sure there is market data from back then, I don’t have any. We then have to wait until 1974, when impeachment proceedings began against Richard Nixon, but ended after he resigned. Bill Clinton was impeached in 1998, but acquitted in 1999. So that leaves us with a sample size of two, not exactly statistically significant.
And even the examples we have don’t tell us anything significant. From Feb. 6, 1974, when the impeachment process against Nixon formally began, through Aug. 9, 1974, when he resigned, the S&P 500 dropped 13%. So clearly, impeachment is bad for the stock market.
Except that from the start of Clinton’s impeachment in January 1998 through his acquittal in February 1999, the S&P 500 gained 28%, according to Bespoke Investment Group data. There was a 20% drop in there, but that was caused by the implosion of Long-Term Capital Management, not anything related to the impeachment itself. So clearly impeachment is good for the stock market.
Or could it be that the differences between the two were due to something besides the impeachment proceedings? Bespoke’s Paul Hickey chalks the difference up to the economies of the two periods. “While stocks made it through the Clinton impeachment pretty much unscathed, the experience during the Nixon...impeachment and resignation in the early 1970s was much worse, but the difference between those two periods was the economy, which was in two very different places in the 1970s and 1990s,” he writes.
You don’t have to look much farther than how the market has performed since the inquiry was opened on Sept. 24. Since then, the Dow Jones Industrial Average has returned 3.6% including reinvested dividends, and closed Tuesday at its all-time high.
Writes Hickey: “With regards to impeachment, whatever ultimately happens regarding the President, the Democratic-controlled House, and GOP-controlled Senate is anyone’s guess, but if you want to know how the market will react, you’re better off paying attention to the economy rather the Washington headlines.”
Write to Ben Levisohn at Ben.Levisohn@barrons.com
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.