Beware Shorting Impeachments

We’ve analyzed the behavior of the S&P500 during the Watergate impeachment hearings and the Clinton impeachment.  If you’re shorting risk markets solely based on speculation that President Trump may be impeached, maybe you should think again.

Let’s first look at the Clinton impeachment S&P500.   The market never seemed to take the Clinton impeachment seriously and was never a threat to the stock market.

Then we’ll analyze the more complicated Watergate scandal, which many consider the main culprit of the 1973/74 bear market, a 50 percent decline in S&P500 from January 11, 1973 to October 3, 1974.

Clinton Impeachment
The rumors of the Clinton-Lewinsky affair broke January 19, 1998, on the Drudge Report, which was a market holiday.  Recall U.S. stocks were in a rip-roaring bull market and massive bubble that saw the Dow rise 253 percent during the Clinton administration, second only to Calvin Coolidge’s roaring twenties bull market (see here for Presidential Stock Returns).   The NASDAQ, home of the infamous dot.coms,  rose a multiple of the Dow.

The table below shows the timeline of various key events and the S&P500 returns.