We have received multiple questions and a few requests to provide an update on the markets since the news broke on Tuesday that the House of Representatives will “open an inquiry” regarding the President on impeachment. Fortunately, we have also received numerous expert opinions from our research analysts, and I will share their comments along with our own.
There are few historical incidences to compare in the market when it comes to impeachment of a sitting President.
1998 – President Clinton
- President Clinton is impeached by the House but acquitted by the Senate
- S&P 500 during that “affair” was up 28%
Source: Bespoke Investment Group, Chart of the Day, 9/24/19
1974 – President Nixon
- President Nixon resigns August 1974 before impeachment hearings begin in House
- From the start of Watergate (1973) until resignation, the S&P 500 was down 50%
Source: Financial Times, How U.S. Stocks reacted to past impeachments, 9/24/19
Unfortunately, those two time periods were marked by significantly different economies in the U.S. that do not show the relevance of political strife in the market. In both instances, it appears the politics showed little influence on the performance of the stock market over a longer time period. It also seems the same holds true in the last two days.
Jeffrey Saut with Saut Strategy sent the following comments earlier today:
“…according to the U.S. Constitution the House has the sole power to impeach. However, individual House members must introduce impeachment resolutions like ordinary bills, or by vote passing a resolution authorizing an inquiry. That has not happened yet. As Representative Doug Collins notes, “Speaker Pelosi’s decree changes absolutely nothing. As I have been telling Chairman Nadler for weeks, merely claiming the House is conducting an impeachment inquiry doesn’t make it so. Until the full House votes to authorize an inquiry, nobody is conducting a formal inquiry.” Importantly, impeachment is a political, not criminal, event and we doubt President Trump will be impeached and forced to resign (a tip of the hat to the Sevens Report).”
History would suggest that we are better served to monitor the current economic situation to determine how stocks will perform in the coming months. We would concur that the U.S. economic state and anticipated corporate earnings growth will be bigger drivers of short-term performance for the S&P 500. We will continue to monitor the impact of political news on portfolio’s and adjust where warranted.
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Engrave Wealth Partners Investment Committee
Bill Day, CFP®, CIMA
Taylor Parker, CFP®