Impeachment and the Stock Market

Market Insights

With the Democrats in Congress starting a formal impeachment inquiry into President Donald Trump’s phone call with the Ukrainian President, some people are wondering what effect impeachment will have on the stock market. Three United States Presidents have previously experienced an impeachment inquiry:

President Andrew Johnson 17th President of the United States, was impeached but there were not enough votes to convict him. We do not have enough data about how the stock market responded at that time.

President Richard Nixon 37th President of the United States was impeached in 1974. During his impeachment the economy was already in decline. OPEC placed an oil embargo on the United States because we supported Israel during the Arab-Israeli War of 1973. The country was moving into a recession and President Nixon resigned before he was impeached. The impeachment contributed the cloud of uncertainty concerning the stock market.

President Bill Clinton 42nd President of the United States, impeachment inquiry started in January 1998 and he was acquitted in August 1999 due to the lack of votes needed to convict him. Over a year and a half, the stock market experienced a -20% correction. Most analysts feel the decline was due to the failure of a company called Long-Term Capital Management. The stock market did improve and finished the year in positive territory. The impeachment process had little to no effect on the stock market.

No one knows what an impeachment inquiry for President Donald Trump will mean this time around. Information about previous impeachments seems to indicate it is really about what the economy is doing during the impeachment inquiry.

There are concerning signs the economy is slowing.  An ISM Manufacturing Report of 50% or above suggests the economy is expanding. When the report falls below 50% it suggests the economy is contracting. The average ISM number for the past 12 months is 53.5%. In August it fell to 49.1% and September’s number fell to 47.8%. This is the lowest level since June 2009.

The ISM Report the past two months suggest the U.S. economy is slowing along with global manufacturing. Historical data like the ISM Manufacturers Report can provide better data and guidance than past impeachment inquiries.