Topline: With the House of Representatives expected to vote in favor of impeaching President Donald Trump on Wednesday evening, the stock market has largely trended flat, with little movement to either the upside or downside. Here’s how the markets are reacting today and what investors can expect in the next few weeks:
- So far the stock market has been largely unfazed by the news of impeachment proceedings: The S&P 500 and Dow Jones Industrial Average are both up slightly on the day, by about 0.10%. Both indexes have actually gained since last week, rising 0.85% and 0.5%, respectively.
- “I don’t think impeachment is unimportant, but the markets have had a lot of time to digest the news,” says Adam Crisafulli, founder and president of Vital Knowledge Media. He points out that, as it stands, both the House and Senate votes will be very partisan and that’s largely been priced into market expectations, making it a “complete nonevent for stocks.”
- Given that the Senate is widely predicted to acquit Trump, “the market isn’t expecting anything to come of this,” says Paul Hickey, cofounder at Bespoke Investment Group. “Any reaction is going to be more a function of what the economy is doing rather than who’s in office.”
- “From an economic standpoint, impeachment simply hasn’t mattered—and it isn’t likely to,” says Brad McMillan, chief investment officer for Commonwealth Financial Network. “Investors look at fundamentals—economic growth, earnings, labor costs and so forth—and none of these factors have been affected by impeachment.”
- Despite Trump’s claims to the contrary, historical data suggests that the stock market won’t actually “crash” if he were to be successfully impeached: Stocks plunged when Nixon resigned, while the market soared when Clinton was impeached.
- In both historical cases, market reactions were due to the broader economic picture, Hickey points out. Under Clinton, the market rallied on strong economic fundamentals, while under Nixon the economy was in tatters, with high inflation and spiking oil prices.
Crucial quotes: “As far as impeachment concerns go, obviously presidents can make their presence felt on the economy, but in the long run ‘it’s the economy stupid,’” says Hickey.
“Despite the frenzy, it’s an open question whether we should care. As citizens, we certainly should. As investors—no,” says McMillan. “It makes sense that the markets have not been derailed by the impeachment process.”
What to watch for: “If there was a bigger risk that Trump would be removed from office, with one or two Senate Republicans defecting, that could spark a bit more anxiety in the markets” says Crisafulli. Similarly, if impeachment drags on and creates political turmoil, that could hurt investor confidence in the economy and markets, says McMIllan. “If political dysfunction—and this risk isn’t limited to impeachment—shakes confidence, it could take a toll on the bigger economic picture.”