The Trump impeachment trial: An American constitutional crisis once again proves no match for the power of the markets

January 23, 2020, 11:24 AM UTC

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Good morning, Bull Sheeters. Today, I want to talk politics. Specifically, the I-word.

The impeachment trial of President Trump may be a lead story in newspapers from London to Los Angeles—it’s getting decent TV ratings, too—but it’s barely moving the markets.

This has been true for months. The global markets just don’t seem to get freaked out about America’s constitutional crises the way they do about other geopolitical risks. Investors seem far more preoccupied with coronavirus this morning. (The Asia markets are down as I type this.) Earlier this month it was the fear of war with Iran.

Historically, American presidential impeachments have had a mixed—lately, it’s been downright good—impact on markets. Paradoxically, when lawmakers rally to boot out of power the leader of the free world, investors tend to shrug it off.

True, there’s not a lot of data to go on. But so far with the Trump affair, markets have not only survived the drama, they’ve actually rallied. And you know what? The same thing happened during the Clinton affair, as the chart below shows. (A big thanks to LPL Research for helping me put some of this data together).


Another impeachment, another rally

As you can see, there was no longterm Nixon rally back in 1974. Soaring oil prices put an end to that. The Clinton saga in 1998-99 was a whole other story. The markets rallied longer and more dramatically during that matter, climbing 41.6% over the first six months, helped by the strong economy of the late ’90s and investors’ newfound love for tech and dot-com stocks.

But the 12% rally on the S&P 500 since Sept. 24, 2019, the day House Speaker Nancy Pelosi announced the opening of a formal impeachment inquiry into Trump, ain’t shabby either.

I’m guessing Trump won’t be re-tweeting this particular chart.

Bernhard Warner

Today's reads

The plan to save WeWork. Yes, there is one. Fortune's Polina Marinova met with WeWork's other founder, Miguel McKelvey, to find out the steps the troubled unicorn intends to take to bail itself out of the mess it's in. For starters: they'll be slowing down.

Back to school, Greta! U.S. Treasury Secretary Steven Mnuchin dropped a groan-inducing "joke" on Davos when he told the great and the good that climate activist Greta Thunberg should go to college and study economics. And then, and only then, "she can come back and explain... to us" how divesting in fossil fuels is in the world's best economic interest. Breaking all rules of comedy, Mnuchin hastened to add it was “a joke. That was funny.” Ba-dum-chhhh.

Luanda Leaks. The scandal around Isabel dos Santos, Africa's richest woman, for allegedly enriching herself at the expense of her fellow countrymen in Angola threatens to now implicate accounting firm PwC, the Guardian reports. 

$100 billion. Tesla's share price closed up 4% yesterday, putting the automaker into the $100 billion valuation club, and triggering a big payday for Elon Musk. If it's a good day for Musk it must then be another bad day for the army of Tesla short-sellers out there. Musk, we're reminded, "does good at rockets" too.

Market candy

-14.9. Today's candy might leave a bitter taste. It's an historical look at geopolitical risk and the impact on markets, put together by Shroders, examining how a number of major global news events impacted the markets over the years. The September 11 attacks is still up there as the most disruptive, triggering a significant flight to safety. Gold soared, as did U.S. Treasury 10-year notes in the aftermath. The S&P 500 fell 14.9%.

One last thing

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