In this episode of Retire Your Way Radio, I talk about the reality of how impeachment proceedings affect the stock market by looking at prior impeachments and the economic forces going on at the time.
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Impeachment and the Stock Market
President Trump says the stock market will crash if the impeachment process continues. Last year he said, “everybody would be very poor” if he was removed from office.
The President might think the stock market is all about him, as many before him have thought as well. But the reality is that economic forces have much more influence on stock market movements than the typical short-term changes in Washington D.C.
For a little context, since the year 1900, the U.S. has had two world wars, Korea, Vietnam, Desert Storm, ongoing operations in the Middle East, The Great Depression, and around 20 recessions and the Dow Jones Industrial Average has grown from under $100 to over $26,000. So, we’ve certainly had our problems, yet we have persevered.
Impeachment over the Past 100 Years
As for impeachment, there is obviously no guarantee when it comes to anything related to the stock market, and history doesn’t offer much of a guide considering there have only been two impeachment processes (Clinton and Nixon) in over 100 years, and both of those had very different market outcomes.
During President Clinton’s impeachment process, the market initially declined around 20% prior to his trial only to recover during the actual trial. The impeachment process became nothing more than a blip on the radar during what we would later discover was the run-up to the dot-com bubble.
During President Nixon’s impeachment process, the markets fell over 20%. From the announcement of the Watergate scandal in June, 1972 until the President’s resignation in August, 1974, the S&P 500 had fallen over 20%.
Economic Conditions during Impeachments
As with most presidency’s, economic conditions had more to do with the market’s performance than the political process. The 1973-74 period saw the consequences of the U.S. leaving the gold standard and oil prices shooting through the roof. We had inflation and falling equity values. It was arguably the worst time in the last 120 years to retire.
During the Clinton impeachment, the U.S. economy was booming, and the market was on its way to the previously mentioned dot-com bubble.
Unfortunately, in this case, impeachment history isn’t much of a guide for how this process may unfold. It’s probably best to make a plan and stick with it!