Stocks rose Thursday morning after Donald Trump became the third U.S. President to be impeached.
Topline: Though the House of Representatives voted to impeach President Donald Trump on Wednesday night, the stock market rose to new record highs in their first session after the news, boosted by trade progress and a U.S. economy that continues to hold steady.
- The Dow Jones Industrial Average and S&P 500 rose by 0.4% and 0.3%, respectively, both hitting new all-time record highs.
- Since House Speaker Nancy Pelosi announced the formal impeachment inquiry on September 24, the S&P 500 has risen 7.6%, while the Dow has risen by almost 5.5%.
- That’s led some to compare the current market rally to reflect the impeachment process of Bill Clinton, when stocks consistently moved higher, as opposed to Richard Nixon’s resignation, when the market crashed into recession.
- But in both historical cases, it was the economy that drove the market, not political news, experts say: The drop under Nixon was to be expected, given the terrible economic situation at the time, while under Clinton, the market rallied thanks to a strong economy.
- Comparisons to the rally that occurred during Clinton’s impeachment suggest that stocks could outperform throughout the Trump impeachment process, as pointed out by Edward Moya, senior market analyst at Oanda. “Clinton, however, had much of his rally based on the dot-com bubble, while Trump has his based on massive stimulus from central banks globally,” he says.
- With the Senate widely expected to acquit Trump, “there will be no change for the markets to consider,” says Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. “As a result, we would expect the impeachment to not affect markets, which will instead continue to focus on the economy, trade and corporate earnings.”
Crucial quote: “We’ll see short-term market moves on a day-to-day basis, but for now, provided no smoking gun news comes out before the Senate trial, I think the market will react as it has so far,” says Paul Hickey, cofounder at Bespoke Investment Group.
“Markets should not see much of a reaction with the President’s impeachment saga as it is unlikely for the Democrats to get two thirds of the vote in the Senate to convict Trump,” Moya similarly predicts.
Crucial statistic: The S&P 500 gained over 26% during Clinton’s impeachment process, while it fell 13% from the start of Nixon’s impeachment to his eventual resignation.
Key background: The House of Representatives voted in favor of two articles of impeachment against Trump on Wednesday. The first, for abuse of power, alleges that the president pressured Ukraine to investigate his political rival, former vice president and 2020 Democratic candidate Joe Biden. The second article accuses Trump of obstructing Congress by refusing to cooperate with the impeachment inquiry in the first place. After Pelosi announced the impeachment proceedings in September, numerous witnesses gave testimony in both closed-door and public hearings, which concluded in late November. With the House vote in favor of impeachment yesterday, the process moves to the Senate, which is expected to hold a trial in January.