Don’t Bet on a Market Crash If Trump Gets Ousted
Based on the past, major political events don’t have much effect.
Bloomberg, August 24, 2018
Even by this president’s tumultuous term, this week saw a whole new level of political volatility 1 So much so that it appears President Trump is a getting bit nervous. From the White House, he did a softball interview with Fox & Friends (his favorite TV show). He declared:
President @realDonaldTrump: “I don’t know how you can impeach somebody who’s done a great job.” pic.twitter.com/3BZNpSzish
— Fox News (@FoxNews) August 23, 2018
It is a reasonable question deserving of closer scrutiny: What happens when external events roil markets? How do impeachments, or for that matter, military or terror attacks or even presidential assassinations, impact equity markets?
The short answer: truly unanticipated events – think Pearl Harbor 2 and September 11th attacks or JFK assignation 3 – see the markets temporarily wobble under the strain of the emotional outpouring. Once that subsides in a few days or weeks, markets then resume their prior trends.
President William Jefferson Clinton impeachment: Clinton was deep into a roaring economic expansion, modest inflation and a technology boom. The roaring market shook off the impeachment, and finished the year strongly.
The tech heavy Nasdaq was much stronger than S&P500 during the year, although both wobbled on the 1997 Asian contagion and the 1998 collapse of Long Term Capital Management hedge fund. Regardless, the markets shook off the impeachment and finished the year strongly, setting up an even stronger 1999.
Continues at Bloomberg . . .
1. As this is being written on August 24th, 2018 we learned that longtime Trump Organization CFO Allen Weisselberg was granted immunity in the Michael Cohen probe.
2. From December of 1961 to June of 1962 markets fell more than 27 percent fall when JFK and the Steel industry, demanding a roll back of new price increases. “From its December 1961 peak at 741, the Dow fell by 29% in six months, to 525 by late June, 1962.”
3. The 2003 Invasion of Iraq, occurred after markets had bottomed in October 2002. Nervousness led to some selling pre-war, but once the war began, markets almost doubled over the next 4 years.