It’s the economy, stupid: what an impeachment may mean to the markets

Today’s chart (courtesy of focuses on two Presidential impeachment enquiries, and the market’s reaction to these events. I wanted to explore just how much impact an impeachment enquiry of President Trump might have on the stock market. Interestingly, both of these enquiries took place within a prolonged sideways market pattern. It should not escape us to note that the markets have been stuck within a sideways pattern since early 2018. I’m not sure what to make of that observation. Perhaps that history is repeating itself….

Tricky Dick


On Feb. 6, 1974, an impeachment inquiry was launched against President Nixon – “Tricky Dick” himself. Initially, the news was shrugged off by the stock market. But, as the inquiry drew closer to an eventual impeachment decision and resignation by the President, the market fell by more than a third of its value! Yikes! The Dow Jones Industrial index fell from almost 1000 to around the mid 600’s.  It’s easy to pin the decline of the market to the impeachment of the President. One might conclude that this event was the exclusive cause of the stock market crash. However, other factors came into play during that time.

Nixon had suspended the gold standard (the monetary system in which the standard economic unit of account is based on a fixed quantity of gold). Moreover, the economy was in the midst of a recession. It was also recovering from the 1973 oil crisis, which began in October 1973 when the members of the Organization of Arab Petroleum Exporting Countries proclaimed an oil embargo. I was a highschool teenager with a full head of hair,  rockin’ out to Rush & Led Zeppelin at the time. I didn’t pay much attention to markets back then – but I do recall my dad’s concerns with the economy and the future of gasoline availability.  My point (beyond giving away how old I am) – the market had more to worry about than the impeachment. It was part of the secret sauce that spoiled the markets, but not the entirety.

Slick Willie


Fast forward to October 8, 1998. The house voted to begin an impeachment inquiry against President Clinton – sometimes referred to as “Slick Willie”. The markets initially reacted with a fairly minor 1% draw down on the day the impeachment was announced. Less than a year later (February 1999), Clinton was acquitted by the Senate. The market climbed 30% (the Dow rose from the low 9000’s to near 11,000). That’s a bull market rally if I ever heard of one! Again, it might be easy to conclude that the market rises, or at worst pays no attention to impeachments after hearing of this market rally. given the bullishness from the get-go upon the announcements of Clinton’s impeachment inquiry.

Again, the market rally was not inspired by the potential impeachment of a President any more than the market decline during Nixon’s impeachment inquiry. Back in 1998, I was an Investment Advisor with Merrill Lynch Canada. Many readers will recall the tech bubble of those years – which took until 2001 (coinciding with the terrorist attacks in the United States) to end. Markets were far more interested in jumping on the next dot-com story than worry about Slick Willies sexual adventures in his Whitehouse office.


The Donald


The impeachment enquiry of President Trump, also known as “The Donald”, was announced this week. U.S. House Speaker Nancy Pelosi has announced a formal impeachment inquiry of U.S. President Donald Trump following reports that he asked a foreign government to investigate a potential 2020 election opponent. So far, the market has reacted with a sub-1% decline. This might line up with the market’s initial reaction to Clinton’s impeachment enquiry. Like Clintons enquiry, the market has pretty much shrugged it off.




“It’s the economy, stupid” was a campaign slogan of sorts during Bill Clinton’s successful 1992 presidential campaign against president George H. W. Bush. He was right. It is the economy, um, stupid (hopefully he was not referring to you and I).  Given the history behind the last two impeachment enquiries, it might be logical to assume that the market will pay more attention to the economy than Trump’s impeachment proceedings. Trade deals, job numbers, GDP growth, and other economic factors will be translated into either bullish or bearish chart patterns on a forward-looking basis. For this reason, I’ll be paying more attention to stock market patterns than the ongoing enquiry investigations when looking for clues to remain invested in the markets. At this juncture, we are holding some 30% cash in our VT Equity Platform, and expect to become fully invested in the coming weeks as the seasonably favorable period for the stock market begins.


  • A while back you recommended TBF as a way to play TLT dropping. Where do you stand with TLT now?

    • I’m not in long bonds, but I am not “shorting” (inverse ETF) them either.

  • Drop by one third? Wow, I am 20% cash so that would be a fantastic buying opportunity.

    p.s. No need to post my comments. Love those photos and nicknames!

    • Robert–it depends on which of the two past impeachment enquiries you are examining.
      Nixon’s was during a recession, and markets saw a 30%+ drop
      Clintons enquiry was during a bubble, and markets saw a 30% rally.

  • Joe Chidley, in today’s Financial Post concludes that not much will happen with impeachment proceedings. “After all, there a plenty of other things for them (investors) to worry about.”

    Seems it depends on what else is going on at the time of impeachment proceedings, which probably has the greater affect on the markets.

  • So if the new NAFTA doesn’t get ratified because of the impeachment proceedings, and the market reacts in a negative manner, is the decline because of the economy or the impeachment. Gives the “experts” plenty of leeway to be always right.

  • Hi Keith-what d’yer maker of Fairfax Financial’s chart for long position at this point?

    • First–I’ll disclose that I own the stock personally and professionally in our VT Equity Platform. The stock has bounced off of $560 many times in the past. Its hit low $700’s many times in the past. Wash, Rinse, Repeat. Blackberry (which we also own a small position in) has been the culprit for this pullback on FFH. But they have more cards up their sleeves (insurance, India, etc) so its still in our platform with an eye on that $700+ target at some point.

  • I am looking at the US Financials as a trade. Given your bearish call on the CAD $ does the ZBK makes senses at this point?

    • I’m not sure if zbk is currency hedged or not- i do know that the SPDR financial ETF (XLF) trades in USD

  • Why would a technical analyst needs pics on his blog?. Ditch the pics Keith. I am beyond tired of seeing DT face. Really like we don’t know who he is. Give us another chart or something intellectual to consider, or more of your commentary. Thank you for your blog.

    • Hi Lana
      About 1 out of every 50 blogs I have a little fun and post caricature pictures – so yes, every once in a while you’ll see me do this. But you know (as a regular reader) it isn’t everyday. Hey–gotta have a bit of fun once in a while on this blog!

  • Interesting comments on this blog. But TA is all about following the money. Much is made about interest rates,impeachment, trade, blah blah. The U.S treasury is pounding the market with supply of debt which affect prices(rates) and liquidity. The stuff I read implies this is a late cycle market likely driven by leverage. The treasury needs to raise more money in the coming months than the market can handle Bad things can happen irrespective of seasonality.

    • No arguments from me on that, Bert. That’s the beauty of TA – you follow the trend. Get out if we get a lower low, lower high and break of the 200 day SMA. No need to formulate opinions. The only thing I adjust my caution levels on outside of the chart are the factors that make up my Bear-o-meter. Even so, that is just a cash adjustment vehicle to reduce potential risk.


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