“How Would a Trump Impeachment Affect the Stock Market?”
Our question today deals with yesterday’s big political news, and a potential reason for the stock market futures turning south this morning.
Today’s question is:
“How would a Trump impeachment affect the stock market?”
Transcript - How Presidential Impeachments Affect the Stock Market
If there is one thing that stock markets hate, its uncertainty. So its easy to understand why we should expect some increased stock market volatility if there appears more to Donald Trump’s personal and business dealings than meets the eye.
Thankfully, the sample size of U.S. presidents facing impeachment in the modern stock market era is pretty low. President Clinton was impeached by the House in 1998, but not the Senate. And president Nixon technically resigned in 1974, but would have likely been impeached.
So how did the U.S. stock market perform during these two periods?
From the beginning of the Watergate scandal to a few weeks after Nixon’s resignation, U.S. stock markets fell more than 40%.
It is important to note that there was a lot of other events going on at this time. The OPEC oil embargo occurred at the end of 1973, Egypt and Syria were at war with Israel, and inflation was beginning to rise significantly. How much would the markets have gone down without the oil embargo, war or inflation? There is really no way to know.
It would take the stock market 2 years after Nixon’s resignation to recover from the decline.
The impact of the attempted impeachment of President Clinton was much more muted. U.S. stock markets did fall 20 percent in the middle of 1998 before impeachment proceedings technically began, but while the scandal unfolded, however stock markets largely recovered by the time the impeachment bill was voted on in the house and the senate in late 1998 and early 1999.
So there is a little bit of historical perspective. Of course no one knows what is to come so making radical investment decisions today based on what might happen in the future is probably a bad idea.
What is important is to realize that 20 to 40% drawdowns in the stock market can occur, and that your portfolio is set up to be able to weather the storm, whenever it comes.