Thankfully, when it comes to impeachments, there is very limited historical data to review. We don’t have useful market numbers for the 1868 impeachment of President Andrew Johnson, and even if we did, the markets were so different 150 years ago that a comparison would be all but useless. This leaves us President Nixon’s pre-impeachment resignation in 1974 and President Clinton’s impeachment (and Senate acquittal) in 1998.
When President Nixon resigned, the U.S. economy was in the midst of a recession, with stocksA financial instrument giving the holder a proportion of the ownership and earnings of a company. already in a bear marketA period in which stock prices decline significantly from recent highs and remain below previous high marks for weeks or months. Generally, a decline of at least 20% in stock prices is considered the threshold marking the start of a bear market.. StocksA financial instrument giving the holder a proportion of the ownership and earnings of a company. continued to fall in the months immediately following his resignation, but that might have happened regardless. Notably, the S&P 500 reached a bottom soon after Nixon departed. One year after Nixon’s resignation the S&P 500 (not counting dividendsA cash payment to investors who own stock in the company.) was up 12%.
The opposite scenario unfolded when President Clinton was impeached. The S&P 500 had been in the midst of a bull market, though it had wavered a bit due to a currency crisis in emerging markets. But the S&P had already resumed its upward climb before Clinton’s impeachment, and it continued to rise after. One year later, the S&P 500 was up 19%.
Investment lesson: Don’t conflate impeachment furor with investment action.
While we will watch the process closely on your portfolio’s behalf, we won’t make the error of letting political dysfunction lead to portfolio disruption. The good news: Our investment discipline is unimpeachable.
Please note: This update was prepared on Friday, September 27, 2019, prior to the market’s close.
This material is distributed for informational purposes only. The investment ideas and opinions contained herein should not be viewed as recommendations or personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.
Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged.
Past performance is not an indication of future returns. We do not provide legal or tax advice, nor sell insurance products. Tax, legal and insurance information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice, or as advice on whether to buy or surrender any insurance products. Always consult an attorney, tax professional or licensed insurance professional regarding your specific legal or tax situation, or insurance needs.
Companies mentioned in this article are not necessarily held in client portfolios and our references to them should not be viewed as a recommendation to buy, sell or hold any of them.
The Adviser You Can Talk To Podcast is a trademark of Adviser Investments, LLC. Registration Pending.