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About Impeachment . . .

17 December 2019   |  

As the last two impeachments (and possibly the one prior, too) have shown, impeachment has basically become a political way to say you don’t like the other guy. Whether that should be the case, whether the various parties were right to dislike him, whether they should have used other means to make their point—all topics for another day. In the current case, no matter what anyone thinks of President Trump, House Republicans or Democrats, Senator McConnell, Speaker Pelosi or anyone else in the ongoing theatrical production known as impeachment, US stocks have spoken loud and clear in 2019 (to date): They don’t care one whit about impeachment. 

This isn’t terribly surprising—they didn’t much care about President Clinton’s impeachment in 1998-1999, either. In an eerily reminiscent timeline, the House voted to impeach on Saturday, December 19, 1998. The S&P 500® closed on Monday, December 21, 1998, up 1.2%. Through the end of 1998, it was up 2.2%. Through the end of the following year, it was up 23.7%. And the bull market ran on until September 2000, when the tech bubble burst—with which, we’re reasonably confident, President Clinton (and his impeachment) had next to nothing to do. Now, this isn’t to say past is prologue—markets could do any number of things between here and the end of this year, let alone next. 

But what is pretty clear is markets weren’t particularly concerned one way or the other about the last president’s impeachment. If anything, this impeachment may give markets something of a near-term boost because it ensures political gridlock. Draining representatives’ time with impeachment hearings means they don’t have much time to pass meaningful pieces of legislation. To be fair, that can be a good or bad thing at a high level. Some legislation is necessary and brings positives (think free trade agreements, unwinding onerous regulation, etc.). But in the near term—and especially at the local level—legislation creates winners and losers and introduces a healthy dose of uncertainty as to who is who. In contrast, there are few things more certain than policy outcomes in a bitterly divided government—and that’s historically been a pretty darned good backdrop for stocks. 

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