Impeachment + Markets
We’ve been fielding phone calls from clients who ask what the current impeachment investigation might mean for financial markets. We’ve looked at the previous two modern day impeachment inquiries for guidance.
First off, we have no point of view on whether the president should or shouldn’t be removed from office. Impeachment is a political, not a criminal process. The subjective bar to initiate proceedings is whether Congress believes the president committed “high crimes and misdemeanors.”
In Nixon’s case, this was a cover-up of the White House’s involvement in a burglary of the Democratic National Committee’s headquarters in the Watergate office complex in DC. In the case of Clinton, the impeachable offense was also a cover-up, this time about an extra-marital affair between the president and a White House intern.
What matters most in determining whether a president will face impeachment and removal from office is the public opinion necessary to convince Congress that the political consequences of their vote won’t get them fired. As of October 21st, according to Rasmussen Reports, 45% of the public approved of Trump’s job performance while 53% disapproved. Fox News released a poll on October 8th that put the percentage of Americans who believe he should be impeached/removed at 51%.
What Matters Most
You can see from the charts below that markets reacted quite differently during the Clinton proceedings vs. the Nixon impeachment process. Keep in mind that in both cases neither president was removed from office, although with the threat of an almost certain affirmative vote by the full House along with the now famous “smoking gun” tape, Nixon resigned before the formal House vote.
With a data set of exactly two, it is almost impossible to draw any conclusions that an impeachment investigation, and / or the removal of a sitting president will impact markets positively or negatively. After Nixon’s resignation, markets continued along the bear market course they had been on but soon entered a 3-year 86% bull move in the S+P 500. Clinton’s impeachment was toward the end of an otherwise massive bull run that culminated in the dot.com bust of 2000.
The odds that Trump will be impeached are currently high, but the chance of his removal from office by the required 2/3 majority of the Senate is — barring any new damning revelations — highly improbable.
We’ve consistently noted that the two things markets care most about are the level of interest rates and corporate earnings growth. Interest rates are near historic lows. With the bull market and economic expansion approaching its 11-year anniversary, we have become more defensive with our portfolios, irrespective of the outcome of the current impeachment process.
What You Should Do Next:
- Contact us with any questions or concerns about impeachment proceedings and the markets.
- Click here to learn more about the ClearRock approach and process.
- Speak with one of our Senior Advisors.
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