Will Impeachment Kill The Market?

Last week, House Speaker Nancy Pelosi announced a formal impeachment inquiry into President Trump. According to The New York Times, the inquiry will look at “charging him with betraying his oath of office and the nation’s security by seeking to enlist a foreign power to tarnish a rival for his own political gain.”

I won’t discuss the politics of this—that’s not our department—but instead, let’s look at the ramifications for the stock market. First off, we have to state the obvious. Given the partisan makeup of each house, the odds of impeachment are relatively high, while the odds of conviction in the Senate are very remote. Twenty Republicans would have to cross the aisle to vote to convict.

Putting that aside, here’s the critical point for investors. One of the major fallacies of investors is to think that what’s in the news is of vital importance to the stock market. But for things like impeachment, eh…it’s really not that big a deal.

The stock market is like one giant cyclops. It has just one eye, and it’s always focused on earnings. Neither impeachment nor Trump nor Nancy Pelosi will kill the stock market.

Let’s look at some history. In 1998 and 1999, the market was hardly bothered by the impeachment of Bill Clinton. If anything, it was a great buying opportunity. Shortly after the Senate acquitted the president, we saw a fantastic rise in stock prices, especially in tech stocks. The stock market didn’t turn south until March 2000.

Of course, policy can undoubtedly have an impact on the stock, and the policy agenda is not always closely related to the political agenda. We’re still a long way from seeing a change of direction in D.C.’s economic policies.

While Richard Nixon resigned before he was impeached, the Watergate-era was an unpleasant one for Wall Street. The country suffered a nasty economic downturn. The pain was compounded by the OPEC oil embargo after the 1973 Arab-Israeli war. The stock market fell hard. It was the worst market crash since the Great Depression.

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Gary Anderson 2 months ago Contributor's comment

If Trump goes, however he goes, maybe we could leave China alone and world prosperity could return.

Craig Newman 2 months ago Member's comment

If we win the #tradewar, we'll have even more prosperity.

Gary Anderson 2 months ago Contributor's comment

But we won't win. We are in the process of losing. The customers are in China. They are upwardly mobile. We can't win.