facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast blog search brokercheck brokercheck
%POST_TITLE% Thumbnail

MCF Insights: Should Investors Worry About Impeachment?

Tweets and speeches don’t drive the stock markets – numbers do


It's now clear that the investigations into President Trump are likely to continue through the 2020 elections. What's still uncertain is the impact that these investigations will have on the stock market. 

After rallying since Trump's election victory in November 2016, the S&P 500 Index has done pretty well, but it has stumbled at times too:

  • Ending 2016 up +11.96%;1
  • Zooming up +21.83% in 2017;
  • Dropping -4.38% in 2018; and
  • +20.55% so far year-to-date at the end of the third-quarter in 2019.

Although stocks have rewarded investors with healthy returns, investors seem more nervous that Trump will be impeached because not only will his pro-business agenda be stalled, but the chaos could send the markets into a tailspin. At least that’s the worry.

And although no one has a crystal ball to tell us how the Trump investigations will end, investors would be smart to tune them out. Here are a few reasons why.

Economics Matter More than Tweets

Traditionally, economics and numbers matter way more than politics to the stock market. While Trump's tweets and speeches get all the media attention, and while the market might seem to react a little bit at times, the reality is that boring economic numbers drive the markets one way or the other. And consider these numbers:

  • Unemployment is at 3.7%, one-tenth of a percent from the lowest level in over 50 years.2
  • We have seen 107 consecutive months of job growth, the longest streak ever. 3
  • Wages have risen 3.2% this year, the strongest year in over a decade.4
  • Inflation has run below the Fed's intended longer-term 2% target for most of this 10-year expansion and core inflation has averaged 2.1% so far this year. 5
  • Consumer spending came in much higher than expected with a 4.7% annualized growth number, the highest gain in 4 years.6 

Impeachment is Unlikely Anyway

Investors should remember that impeachment is very unlikely as no U.S. president has ever been impeached and kicked out of office. 

Andrew Johnson and Bill Clinton were both impeached, but they were acquitted in the Senate, where a two-thirds majority is required for conviction. Richard Nixon avoided impeachment and conviction only by resigning office. 

Earnings Drive Stock Prices

What should investors worry about? Numbers. Specifically, corporate earnings.

It’s an investing adage that earnings are the lifeblood of the stock market. Stocks move in response to real or perceived earnings changes.

1Morningstar Direct

2https://www.bls.gov/news.release/pdf/empsit.pdf

3https://www.bisnow.com/national/news/economy/august-2019-jobs-report-100699

4 https://www.shrm.org/resourcesandtools/tools-and-samples/exreq/pages/details.aspx?erid=145

5 https://tradingeconomics.com/united-states/core-inflation-rate

6https://www.apnews.com/d51ae7a551fd4f45bb9f9f02fe960721


IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by MCF), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual[1] situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from MCF.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  MCF is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.   A copy of the MCF’s current written disclosure statement discussing our advisory services and fees is available upon request. If you are a MCF client, please remember to contact MCF, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. Please click here to review our full disclosure.