What President Trump’s Impeachment and Impending Trial Mean for Markets

On the evening of December 18, 2019, the House of Representatives voted to impeach President Donald Trump, almost 21 years to the day that impeachment was last invoked, and just the third time in our nation’s history. Once the House sends the articles of impeachment to the Senate, an impeachment trial will take place. Upon conclusion, the Senate will vote to determine whether to convict the president and remove him from office. The Constitution requires a two-thirds supermajority for a presidential impeachment ruling.

Simply put, markets care about policy, not politics, and they see impeachment for what it is: political theater.

Equity markets shrugged off the House’s decision and hit another all-time high on December 19. Simply put, markets care about policy, not politics, and they see impeachment for what it is: political theater. This means that if President Trump is removed from office and newly installed President Pence continues the same policies as before, the market is unlikely to react. Conversely, if President Trump loses the 2020 election to a Democrat who, upon taking office, does a 180 on current economic policies, you should expect the market to respond vigorously.

How Did Markets React to Prior Impeachment Votes?

Stock market data was quite limited when Andrew Johnson was impeached in 1868. According to Global Financial Data, which constructed a daily record of the stock market by calculating the GFD Railroad Index (a proxy for the economy at that time), markets fell upon Johnson’s impeachment vote and during the first part of his trial but rose as it became clear he would not be convicted.

Similarly, the equity market (as measured by the S&P 500) rose during the impeachment process of President Clinton, which lasted about two months. However, the stock market rose between the impeachment vote and the start of the trial and then fell during the trial. Upon the trial’s conclusion, the market took less than a month to regain its prior all-time high.

Looking Ahead

While the data set is limited, history demonstrates that impeachment may lead to some market volatility during the process, but it has never caused a structural decline. There is always the possibility that “this time is different.” However, with history on the market’s side and a slim likelihood of the Senate voting in favor of conviction, we expect the market to judge impeachment as mere noise.