In Focus: The Market's Reaction to Impeachment
If you weren't around for Andrew Johnson's impeachment, don't feel bad neither was I. Nixon's ordeal was well before my time, and with Clinton, I was too young to care, With the impeachment of Donald Trump I'm more aware of what's going, but my interests are with the markets more than anything
Here's a brief look at how markets reacted to other impeachments and major investigations into a sitting President.
Andrew Johnson 1868
Andrew Johnson's presidency pre-dates market tracking. There were markets, and the New York Stock Exchange was in business. But I could not locate any indices that could provide insight into how the markets reacted.
I did find the Rail Index, which was put together by Global Financial Data. The index rose around the time the articles of impeachment were presented to the senate. Following the article of impeachment the index declined. The markets increased following both votes by the senate that failed to remove Johnson from office.
Based on the GFD’s Rail Index, the markets were weak during the investigations and trials, but investors gained confidence with every vote that resulted in Johnson remaining in office.
President Richard Nixon is a special case because he never made it to impeachment. But let's see what we can take away from the events that preceded his resignation.
The House began its impeachment process on October 30, 1973, following the Saturday Night Massacre The impeachment process was formally initiated on February 6, 1974. In
April 1974, The Judiciary Committee's subpoena allowed edited transcripts of White House conversations to be made public. On August 5, 1974, Nixon released a transcript of an additional conversation, known as the smoking gun tape. On August 9, 1974 Nixon resigned from office before the House could vote on the articles of impeachment.
Bill Clinton’s impeachment was initiated on October 8, 1998, Bill Clinton was formally impeached on December 19, 1998. The trial in the senate began in January 1999, and Bill Clinton was acquitted on February 2012, 1999.
Sept 24, 2019, a formal impeachment inquiry was launched. On December 18, 2019, the House voted to impeach Donald Trump.
The chart documenting the impeachment of Bill Clinton would be the best chart to work from when anticipating markets following President Trump's impeachment.
Under Clinton's presidency the markets roared. Clinton was lucky enough to be the sitting president during a time when the personal computer and the internet became affordable enough for many American households. More Americans online led to the dotcom boom, and from there billions of dollars were created in market value from internet companies and companies that serviced internet companies. The S&P increased 174% from the time Bill Clinton took office up to the day he was formally impeached. This timespan includes a full first term and three years into his second term.
Like the markets under Clinton, the markets have expanded greatly under President Trump. From the time President Trump was inaugurated and up to the time that he was formally impeached the S&P 500 is up 40%.
But even bringing Nixon's chart into the picture, where we see the markets peak and then start to decline at the beginning of his second term, there is an established down-trend happening. The charts during Nixon's tenure and Clinton's tenure do indicate a trend. Whatever the markets were doing before the news of impeachment, they continued to do. The markets were trending down under Nixon, and impeachment only added fuel to the fire. Markets were trending upwards under Clinton and investors brushed aside whatever was happening in D.C. and continued to pile into stocks.
What Can We Expect Now
Can we expect the same market behavior under Trump? I would expect so. Impeachment aside, the markets over the past five years have been incredibly strong. Brexit, the Greek debt default, the Republican nomination of Donald Trump, the presidential election of Donald Trump, escalating hostilities in the Middle East, and the trade wars have all been absorbed and brushed aside by the markets. Also, the markets have continued to move up without resolution to some of the issues listed. Brexit still hasn't happend, the hostilities in the Middle East feel like they're getting worse, not better, and after more than a year we've just received a phase one trade deal agreement between the U.S. and China.
It's not being overly optimistic to think the markets will absorb the recent formal impeachment of Donald Trump and keep moving upward.