October 15, 2019

The Trump impeachment process is progressing at a snail’s pace – and may never happen – but the bears are spinning tales of market crashes along the lines of the horrible 1973-74 bear market, when President Nixon resigned to avoid impeachment over his Watergate cover-up. Alas, there are only three (possibly four) historical examples, so the sample size does not lend itself to solid answers, but the quick answer is that the current impeachment threat is NOT likely to impact our portfolios much over the next year.

Here are the three (maybe four) historical examples, in chronological order:

#1: Let’s begin with the first impeachment trial of President Andrew Johnson, when the House passed articles of impeachment on February 24, 1868. The Senate trial ran from March 30 to May 6, with two May votes narrowly acquitting the President: 35 Senators voted to convict and 19 voted to acquit. With a two-thirds majority necessary for conviction, President Johnson was saved by a single vote.

What did the market do in 1868?  According to “The Almanac Investor” (using Cowles and other early market indexes), the stock market rose 10.8% in 1868. It also rose each year from 1866 to 1872.

#2: Over a century later, President Richard Nixon faced likely conviction in August 1974 when he resigned office. The market was in the midst of a two-year bear market related to a number of outside forces, including runaway inflation after the OPEC oil embargo, the ignominious end to the Vietnam War, the Federal Reserve raising interest rates several times, and the start of a recession in November, 1973.

The market bottomed out shortly after President Gerald Ford pardoned Nixon. Ford, a more mainstream Congressional Republican of a more even temperament, calmed the nation. Then came a phenomenal market recovery as the S&P 500 gained 65.6% from October 1, 1974 to October 1, 1976.

#3: Articles of impeachment were filed against President Bill Clinton on October 8, 1998, but that turned out to be the precise market bottom for the year, a perfect buying opportunity. That market bottom, however, wasn’t related to the impeachment process, which even then seemed overblown. It was due to the Long-Term Capital Management hedge fund crisis at the tail end of the Asian Currency Crisis.

Clinton was impeached by the House in December 1998 and acquitted by the Senate in February 1999. The stock market rose during that entire period, as did consumer confidence. (The University of Michigan consumer confidence Index rose from 97.4 in October 1998 to 108.1 in February 1999.)

Market During Clinton Impeachment Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

After the Clinton impeachment inquiry began on October 8, 1998, the S&P 500 rose 19% in a month and 42% in six months. From this example, investors might want Speaker Pelosi to “bring impeachment on”!

#4: The fourth possible parallel with the current impeachment process came back in 1987. On March 6, 1987, Rep. Henry B. Gonzales (D-Texas) introduced articles of impeachment against President Ronald Reagan regarding the Iran Contra affair. It’s not well remembered today, but there were hearings running three months – from May 5 to August 6, 1987 – including testimony by Oliver North and many others. The House never voted in favor of impeachment and the 1987 crash came for unrelated reasons, but the current situation may resemble that 1987 circus – lots of Congressional hearings but no real impeachment.

How Global Growth and a Cleaner Planet Can Co-Exist

Last Tuesday, a new book was published, “More for Less,” by Andrew McAfee. The Wall Street Journal reviewed it the next day and I bought it online. I’m not done reading it, but it shows the way to solve one major dilemma – a seeming conflict between advocates of a clean planet vs. more prosperity and growth.

We don’t face the dismal choice of either saving the planet OR killing the global growth engine, because technology “dematerializes” growth and miniaturizes most things. There’s no need for so many coalmines or steel plants in the 21st century. Americans are consuming less steel, aluminum, copper, fertilizer, water, timber, and paper than in previous decades, even as our yields per acre and GNP soar. Instead of carrying a camera, calculator, clock, pocket organizer, mini-computer, and phone, one small iPhone does it all.

Andrew McAfee, a research scientist at the MIT Sloan School of Management and co-author of “The Second Machine Age” (2014), credits the magic of the market – that people like carrying less weight so things get smaller. Technology also cuts down the need to travel. You can get a fine college education (or work a job) directly on-line. Also, I bought this book online, so it’s not a manufactured paper book.

McAfee mentions that the U.S. is doing a relatively good job of preserving the planet’s health. While the U.S. accounts for 25% of the world’s overall economy, we contribute less than 1% of its seaborne trash, while China, which now creates 15% of the world’s GDP, contributes 28% of its seaborne trash.

CO2 Emissions and Reductions Bar Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

China and India must also breathe air in the most polluted cities on earth as they struggle through early stages of modernization to reach the relatively lower pollution levels of Europe or North America. As they get richer, pollution will retreat. Poverty is the problem. Technology and capitalism are the solution.

About The Author

Gary Alexander
SENIOR EDITOR

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

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