By Samuel Taube
Let’s be frank. The phrase “Trump impeachment” probably makes some of you very happy – and some of you very angry.
That’s fine. I’m no pundit, and it’s not my job to challenge your political beliefs.
But it is my job to help you navigate the financial markets in these unpredictable times.
And whether you love it or hate it, the phrase “Trump impeachment” is getting a lot of usage in the lead-up to ex-FBI Director James Comey’s testimony in the next few weeks. It’s clearly on the minds of many investors. That’s why the three major U.S. equity indexes plummeted Wednesday amid concerns President Trump’s legislative agenda will be drowned in scandal.
Should you follow the herd and panic-sell your stocks because of the chaos in Washington?
Absolutely not. If anything, you should stay calm and do the opposite.
As we’ll see below, the last two impeachments hardly made a dent in the market’s performance. Even quarterly earnings reports are a more substantive issue for investors than the clowns in D.C.
Anti-Trump or Pro-Trump, Don’t Lose Sleep Over a Possible Impeachment
In case this article is the first thing you’re looking at after living off the grid for a week, let’s briefly recap what we know about President Trump’s situation.
Trump fired Comey last week for unknown reasons. Then Comey released a memo suggesting that he has evidence related to the Trump team’s alleged collusion with the Russian government. According to the memo, Trump told Comey to shut down the investigation into former national security advisor Michael Flynn. Trump has denied all of this, calling it a “witch hunt.”
Comey is testifying before the Senate Intelligence Committee after Memorial Day about all of this.
News of these disclosures sent stocks tumbling, as many on Wall Street now see a Trump impeachment as likely. Anglo-Irish bookmaking firm Paddy Power Betfair claims there is currently a 55% chance that Trump will not complete one term.
And if Comey’s upcoming testimony reveals anything else scandalous, those odds will go up.
Now that we’ve gotten the political news out of the way, let’s move on to the potential market impact. By looking at market behavior during the impeachments of Presidents Richard Nixon and Bill Clinton, we can get a sense of what’s in store for us.
Stocks plummeted during and after the Watergate scandal that led to Tricky Dick’s resignation in 1974. The losses during this period account for a significant portion of the 1970s bear market.
On the other hand, the market gained during the Monica Lewinsky scandal and Slick Willy’s subsequent impeachment. There was a brief correction in the middle of the scandal, but the 1990s bull market endured the turmoil.
Notice the lack of a pattern? In both cases, impeachment caused a short-term correction… but these were little blips. They barely affected the long-term trajectory of the market.
The 1970s were a bearish time for reasons that had nothing to do with Watergate. The OPEC embargo sent gas prices soaring, and stagflation crippled our economy’s recovery.
Similarly, the 1990s were a great time to invest – and that …read more
Source:: Investment You
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