President Donald Trump reacts while speaking during a campaign rally in Battle Creek, Michigan, December 18, 2019.
Leah Millis | Reuters
President Donald Trump was impeached Wednesday night by the House of Representatives, yet stocks were not unnerved on Thursday, ignoring the political firestorm and instead focusing on a trade deal with China and an economy that appears to be reaccelerating.
In this way, Trump’s impeachment process is shaping up to reflect former President Bill Clinton’s, where stocks rallied, as opposed to former President Richard Nixon’s, where stocks fell.
Equity markets have reacted to two of the presidential impeachment processes in vastly different ways, according to data from Bank of America Merrill Lynch.
The S&P 500 fell 13% from the start of the impeachment process for Nixon through Nixon’s resignation in August 1974. Nixon was never formally impeached. Conversely, during Clinton’s impeachment process, which went from October 1998 to February 1999, the 500-stock index rallied more than 26%.
Trump’s process is looking more like Clinton’s, with the S&P 500 up nearly 7% since House Speaker Nancy Pelosi announced a formal impeachment inquiry into Trump in September.
The House voted in favor of two articles of impeachment against the president on Wednesday, abuse of power and obstruction of Congress. The case stems from alleged efforts by Trump to get Ukraine to investigate a top political rival, former Vice President Joe Biden, and his son Hunter. It now moves to the GOP-controlled Senate, which is expected to acquit Trump just as Clinton was two decades earlier.
“While [impeachment] is garnering significant press attention, it remains of little concern to equity markets given that Trump’s acquittal in the Senate is a near certainty,” Robert Kerning, a J.P. Morgan trader, said in a note to clients Wednesday.
A tale of two impeachments
If stocks under his administration continue to track with Clinton’s, Trump’s market could rally tally upward of 40% in the next few months, according to LPL Financial. To be sure, Clinton was impeached in 1998 during the dot-com bubble.
A month after Nixon’s initial impeachment inquiry, the S&P 500 fell 11%. Three months later, the index dropped more than 15% and a year later it had tanked more than 33%. In contrast to Clinton and Trump, the U.S. economy was embroiled in a major recession during Nixon’s impeachment proceedings.
Clinton’s impeachment process brought a market rally of 18.9% a month later, 41.6% three months later and 39.2% a year later. While Clinton was just looking to solidify his legacy, Trump is seeking reelection next year.
“If Democrats meant to diminish the strength of the president, I think the opposite is going to happen,” Joe Watkins, former White House aid for President George H.W. Bush, said on CNBC’s “The Exchange” on Wednesday.
— With reporting from CNBC’s Nate Rattner.