September 30, 2019
Speaker of the House Nancy Pelosi announced last week that she would support an impeachment inquiry into President Donald Trump. We’ve received many requests from our LPL advisors asking what exactly this may mean for the stock market, and here’s what we found.
Impeachment inquiries can cause a good deal of volatility, as stocks fell as much as 20% ahead of President Bill Clinton’s impeachment inquiry that began in October 1998, and we saw the vicious bear market of 1973–74 during the impeachment process against President Richard Nixon.
Of course, the Russian ruble crisis and the failure of hedge fund Long-Term Capital Management also occurred in fall 1998, and soaring oil prices were wreaking havoc on the global economy in the 1970s.
It’s important to note that Presidents Andrew Johnson in 1868 and Clinton in 1998 are the only U.S. presidents to have ever been impeached. President Richard Nixon resigned before the impeachment vote could take place.
As shown in the LPL Chart of the Day, Not All Impeachments Have Been The Same, stocks performed impressively after President Clinton’s impeachment proceeding began, which, incidentally, was during the late 1990s tech boom. On the flip side, stocks were in the midst of a severe bear market and recession when impeachment proceedings were initiated against President Nixon.
”The S&P 500 Index gained as much as 41.6% six months after the President Clinton impeachment process started in October 1998, suggesting markets might care more about the state of the economy than hearings out of Washington,” explained LPL Financial Senior Market Strategist Ryan Detrick.
At the end of the day, LPL Research will be monitoring what happens in Washington very closely, but if the economy remains firm, we’d use any pullbacks as an opportunity for suitable investors to add to equity exposure.
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This Research material was prepared by LPL Financial, LLC.
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