Impeachment And Market Crashes, Lessons From Nixon And Clinton
Recently, a bombshell article from a Senior White House Official was released indicating President Trump has dissenters in the White House whom are actively thwarting some of the President’s agenda. You can read the full article here. While most of the discussion following the article has centered on who wrote the article, (many believing it to be Mike Pence or KellyAnne Conway), it would be beneficial to talk about a different topic. The question burning in the back of my mind over the last several weeks has been what would happen to the stock market if President Donald J Trump was impeached and what are the similarities to the past?
I’d like to start by saying, I’m not for or against an impeachment of the President. I truly believe a removal of the president would be horrendous to our Republic. This is merely an article attempting at it’s best to demonstrate what could happen to the markets if our President were to suffer this early demise. To gain perspective of our potential future, we must look in the rear view mirror to remember similar events in our history.
When you think about past presidents whom have been impeached, who comes to your mind? I think most people would venture to say William Jefferson Clinton or Richard Nixon. The correct answer is there have only been two Presidents in our nation’s history whom have been impeached. The first is Slick Willy and the second is Andrew Johnson. The word “impeach” seems to be thrown around quite frivolously today. It might be important to understand what the word actually means. Encyclopedia Britannica defines impeachment as: “in common law, a criminal proceeding instituted against a public official by a legislative body. In Great Britain the House of Commons serves as prosecutor and the House of Lords as judge. In the United States the House of Representatives institutes the proceedings and the Senate acts as judge”. An important detail to note regarding both Andrew Johnson & Bill Clinton is that neither was convicted by the Senate. To date, our Republic has never had a President removed from office utilizing the impeachment process. And, that’s probably a good thing. But, what about the impeachment process itself? How has that affected the markets?
Andrew Johnson gets a pass on this statistic because the stock market as we know it didn’t exist as it does today during the tenure of the 17th President. Stock trading wasn’t public and was limited to insider groups of people. But, can you just imagine in your mind’s eye what the political climate must have looked like during this time? The 16th President, Abraham Lincoln, had just been assassinated three years prior. The South was still roiling from the effects of the Civil War. And, now the President was being impeached. Without looking into the history, I can’t imagine our fellow citizens feeling a sense of stability during this era.
Earlier I mentioned Richard Nixon. President Nixon is probably the one President who would have been impeached had he not stepped down from office. From the beginning of the Watergate scandal to Nixon’s resignation, the stock market dropped more than 20%. After Nixon’s resignation, the markets rallied until they came head to head with the crises of the Carter Presidency. It’s also important to note, the markets were already under intense pressure before the Watergate scandal and were in bear market territory. The scandal that ensued undoubtedly affected the stock market, but like most events of hype, the markets tend to recoup their losses once said event has passed.
If you remember during the Kenneth Starr investigation, Mr. Starr told Congress that President Clinton engaged in a strategy of deceit in covering up his affair with former White House intern Monica Lewinsky (Nutting, 1998). Hmmm..I feel like I’ve heard this story somewhere before…..But, I digress. The S&P 500 climbed slightly from July 1 to July 17 of 1998, but from there until the release of the Starr report on September 9, it fell by 19.4%, according to data from CFRA Research (Stewart, 2017) However, after the release of the Kenneth Starr report, the markets began to rise as the markets had again responded to media hype and not factual economic data.
It’s interesting to point out a few similarities between President Trump and Presidents Nixon, Johnson & Clinton. With all the talk of a border wall, white nationalism, & xenophobia, President Johnson is quoted as saying “This is a country for white men, and by God, as long as I am President, it shall be a government of white men”(Kunhardt, 1999). Johnson was also a quite unpopular President. “I have been traduced, I have been slandered, I have been called Judas Iscariot” (Kunhardt, 1999). In addition, President Trump’s presidency has been marred with sexual cover-up and accusations much like the Clinton presidency. Also like Clinton, President Trump isn’t a fan of the Special Prosecutor role. In 1999, President Clinton said the role was expensive and harmed America more than helped it. Like President Nixon, Donald Trump appears to be paranoid and unpredictable. In addition, the President appears to be alienating himself more and more even amongst his own party. Like Nixon, the President has also obtained many victories. It’s interesting to point out as Trump deals with Trade with China, Nixon was the President who opened up relations with China. Will President Trump’s accomplishments be enough to prevent an impeachment, a removal from office or his own resignation? Only time will tell. Attorney General Elliot Richardson from the Nixon era is quoted as saying “a government of laws was on the verge of becoming a government of one man”. Is that where we stand today? And, if so, how will that affect our country, our citizens, and our markets?