Is Trump Right About What Would Happen to the Stock Market If He Were Impeached?


It’s impossible to know exactly what kind of ripple effect an impeachment might have on the stock market. But ask President Donald Trump (who, of course, has incentive to persuade others not to pursue one) and, as he claimed in an August interview with Fox News: The stock market would crash and “everybody would be very poor.”

Is he right?

Well, at the moment, Wall Street seems to disagree. Markets essentially disregarded recent news that Trump’s former attorney Michael Cohen pleaded guilty to tax fraud and campaign finance violations and that his former campaign chairman Paul Manafort was convicted of tax fraud. The same week, the S&P 500 actually hit an all-time high and continued to climb toward 3,000.


Trump’s statement does tap into the fear that a major change in the White House could have a negative effect on a market that’s been mostly positive since Trump took office. The last time a president left office under threat of impeachment—Richard Nixon in 1974—stock prices were rocky for a little while.

The S&P 500 kicked off 1973 at 119.1. (Yes, you read that right; clearly, it’s come a long way since.) By the time the House Judiciary Committee approved articles of impeachment in late July 1974, the S&P had fallen to 82.4. And by October 1974, it was at 62.3, meaning stock market investors saw their investment balances fall by about half during the Watergate scandal. Still, it would be back up near 100 again by mid-1975.

It’s also unclear how much of that short-term drop had to do with the unfolding events around Nixon and his resignation in August 1975. There were a host of other economic issues at play, too—from sharply rising gas prices to growing unemployment to suddenly soaring inflation (prices at one point were increasing more than 10 percent year over year).

The last time an impeachment proceeding actually occurred—Bill Clinton in 1998—the market mostly shrugged off the scandal. From January 1998, when the Monica Lewinsky scandal broke, to February 1999, when the articles of impeachment were defeated in the Senate, stocks rose more than 25 percent.

To be sure, stocks did slump about 20 percent during the buildup and release of Kenneth Starr’s independent council report in September 1998. But prices recovered within a few months—rendering the Starr report and Lewinsky scandal mere speed bumps.

How do these examples relate to what’s happening now?

For starters, this shows that Wall Street cares more about money than scandal—and political drama doesn’t necessarily have much to do with earnings reports, employment rates and other economic factors that can have more lasting effects on the market.

The Clinton impeachment process also shows that there can be short-term blips even during lengthy bull markets. In other words, it’s possible that, when word arrives that Robert Muller’s special counsel report is about to be released, the market will drop. But, again, it’s important not to confuse emotional reactions with economic fundamentals.

Plus, the risk of impeachment is relatively low, unless Democrats win the House majority this fall. Even if they do, and Trump is impeached, there’s only a small likelihood that two-thirds of the U.S. Senate would vote to remove him. And even if that happened, there’s little risk that current VP Mike Pence, as president, would reverse policies that the market seems to like, such as tax reform.

So, what’s the bottom line for me?

Remember that we’re in the midst of the longest-running bull market in history. While we enjoy that, it’s important to know that we’re bound to see another correction (when stocks decline 10 percent from a recent high) or bear market (a sustained decline of 20 percent) at some point, which may or may not coincide with bad news for Trump.

That’s normal. And fortunately, neither lasts very long. Corrections typically run for a few months, and bear markets last, on average, for 1.4 years before stocks recover. So prepare yourself for the potential of a few rocky days ahead, but rest easy that over the long term, stocks are extremely likely to remain unimpeachable as a good investment for the future.