As the impeachment process gets underway in the House of Representatives, President Trump has famously tweeted that the U.S. stock market will experience a severe decline if the process goes much further.  This has led many money managers and financial planners to take a hard look at history.

There is no guarantee that history will repeat itself, of course, so this may be a futile exercise.  And in modern times there have only been two impeachment processes (Bill Clinton and Richard Nixon), which is hardly a large sample size or significant track record. 

To make matters more complicated, the two impeachments produced very different market outcomes.

Let’s start with the impeachment of President Clinton in starting in December 1998.  The Senate acquitted Clinton in February of 1999.  Stocks fell in anticipation of the release of the Starr report which detailed the case against the President; from July 17 through September 9, the S&P 500 dropped 19.4%.  After that, however, during the actual trial, there was a significant rally.  The entire decline had been recovered by November 28, 1998.  In all, from the date the House voted to start impeachment proceedings on October 8, 1998 to the Senate’s acquittal on February 12, 1999, the S&P 500 posted a remarkable 28% gain.

So impeachments are great for the market, right?  Not necessarily.  The downfall of Richard Nixon took the markets in the opposite direction.  From the date that the newspapers reported the Watergate break-in on June 17, 1972 until the President’s resignation on August 8, 1974, the S&P 500 tumbled 23.7%. 

It can be persuasively argued that economic conditions had more to do with the upturn and downturn than the political process of impeachment.  In the 1973-4 period, the global monetary system was falling apart as the U.S. left the gold standard.  Oil prices were spiking, leading to stagflation.  Heading into the Clinton impeachment, meanwhile, the U.S. economy was booming and the market was flying high amid the tech boom, the advent of the Internet and a balanced federal budget. 

President Trump may believe that the stock market is all about him, and previous Presidents may have thought so too.  But the reality is that economic forces have much more influence on stock movements than the winds of politics.

Sources:

https://www.thestreet.com/story/14140200/1/when-clinton-was-impeached-ma...

https://www.marketwatch.com/story/market-sentiment-during-watergate-show...

https://www.barrons.com/articles/fedex-ups-stocks-slip-as-response-to-po...

Provided by Storey & Associates, a Registered Investment Advisor located at 1360 South Main Street, North Canton, Ohio offering Financial Planning and Investment Management Services. Content written by Bob Veres. For more information, please contact us at (330) 526-8944 or info@storeyassociates.com.