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| Donald Trump |
Last
week was terrible for President Trump.
His former campaign chairman Paul
Manafort was found guilty on eight counts of bank and tax fraud on Tuesday,
while his ex-personal lawyer Michael
Cohen pleaded guilty to campaign finance violations and other charges on
the same day. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
Investors
who believe that Trump policies were the key attributes to the recent stocks
rally may start becoming worried as speculation that he may be impeached is
growing day after day. After all, he’s the one who sets the path for fiscal
policies.
However,
when looking at last week’s markets performance, it seems investors didn’t
really care about the drama happening at the White House. The S&P 500 closed at a new record high
on Friday and cleared all doubts that we’re in the most extended bull market in
U.S. history.
Although
it’s difficult to know what happens next, it’s worthwhile looking at history
and see how markets reacted on the impeachments of previous Presidents. The
Watergate scandal led to the resignation of President Richard Nixon in August 1974. Stocks were already in a
bear market since 1973 due to the collapse of the Bretton Woods system, the
dollar’s devaluation and the 1973 oil crisis. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
Two
months after Nixon’s impeachment, markets found a floor and rallied by more
than 50% in less than a year. Meanwhile, Clinton’s impeachment attempt in the
late 1990’s by the House of Representatives occurred during a robust economic
expansion and investors didn’t care less. Markets continued to rally until the
burst if the dotcom bubble.
These
two historical examples confirm that investors don’t really care who the
President is. It’s economic growth, fiscal policies, monetary policies, and
earnings growth that matters. The current political turmoil won’t affect
economic expansion or employment. U.S. corporates continue to benefit from tax
cuts and got the wanted deregulation.
What
investors should be focusing more on is what’s next for the Federal Reserve as
the yield curve gets closer to inversion. If Fed Chair Jerome Powell decided to
slow down the pace of tightening policy, this might provide an additional boost
to stocks while it weakens the dollar. Political noise will add some volatility
but won’t change the trend.
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