Impeachment, History, and Stock Market Reaction – October 2, 2019
We’ve had two instances in the modern era when a president was threatened with impeachment or was impeached—President Nixon (1974) and President Clinton (1998).
Investor reaction—
- We were grappling with a significant bear market during Nixon’s second term, while stocks performed well during Clinton’s impeachment (St. Louis Federal Reserve data).
Why the contrast?
- During 1973-74, the economy fell into a steep recession, interest rates and inflation soared, and an oil embargo led to a four-fold increase in oil prices.
- During 1998, inflation and interest rates were stable, and the economy grew at a fast pace.
While political uncertainty may have exacerbated the selloff during the 1970s, the economic fundamentals played an outsized role.
Investor’s corner
Today, the economy more closely represents conditions during the late 1990s. Inflation and interest rates are low, and the economy is expanding.
We can’t rule out day-to-day volatility tied to headlines, but the economic fundamentals will likely determine how shares perform as we move into 2020.
Created 2019-10-02 14:50:10
