September 30, 2019 BARRON’S M3
The Trader
Dow Drops 115 Points as Impeachment Looms
By Ben Levisohn
WHAT MATTERS TO THE MARKET ISN’T ALWAYS
the same as what matters to you and me.
What do we care about? If you go by
what’s running nonstop on cable television,
it’s the beginning of the impeachment
inquiry into President Donald Trump. The
market cared about that, too—the S&P 500
index traded down as much as 0.8% this past Tuesday after
the news broke that House Speaker Nancy Pelosi planned to
begin the inquiry, though the market was already falling
thanks to a disappointing consumer-confidence reading.
But the market didn’t care quite as much as it did on
Friday, when reports came out that the U.S. might consider
delisting Chinese companies from U.S. markets. The Dow
Jones Industrial Average dropped 1.1% before bottoming.
“Being restricted from investing in certain assets has a
very direct, clear consequence,” says Dave Donabedian, chief
investment officer at CIBC Private Wealth Management.
“With impeachment, the implications are further down the
road and much less clear.”
The market dropped for the second straight week, with
the Dow declining 114.82 points, or 0.4%, to 26,820.25, the
S&P 500 falling 1%, to 2961.79, and the Nasdaq Composite
dropping 2.2%, to 7939.63.
Impeachment makes for riveting television. For markets,
the impact is far less clear. From the beginning of Richard
Nixon’s impeachment inquiry in February 1974 through his
resignation in August that year, the S&P 500 dropped about
13%. But from Bill Clinton’s impeachment in 1998 through his
acquittal in the Senate in 1999, the S&P 500 gained 28%.
Obviously, something besides impeachment is going on—
and that’s the market itself. Stocks were already falling
when the Nixon impeachment process began, notes Frank
Gretz of Wellington Shields, and continued to fall. The mar-
ket was heading higher before Clinton’s impeachment, and
only missed a beat when Long-Term Capital Management
nearly took it down. The upshot: “Impeachment sounds seri-
ous,” Gretz writes. “It depends—like most things when it
comes to the market—on the market.”
If the Nixon impeachment began during an obvious bear
market, and the Clinton one began during an internet-fueled
bubble, good luck trying to guess where the market is head-
ing now. It really hasn’t done much for quite a while now. The
S&P 500 has gained just 0.7% this quarter, which ends on
Monday, and just 3.1% since its January 2018 peak.
If you’re an optimist, you might note that the S&P 500 is
just 2.1% away from an all-time high, despite the dribs and
drabs of bad news that have come out in recent weeks. If
“Withimpeachment,
theimplicationsare
furtherdowntheroad
andmuchlessclear,”
saysonestrategist.
22200
23250
24300
25350
26400
O N D J F M A M J J ASDow Jones Industrials CLOSE 26820.25
PERCENTAGE CHANGE: 52-Wk +1.37 YTD+14.97 Wkly –0.43
2375
2550
2725
2900
O N D J F M A M J J ASS&P 500 CLOSE 2961.79
PERCENTAGE CHANGE: 52-Wk +1.64 YTD+18.15 Wkly –1.01
6225
6775
7325
7875
O N D J F M A M J J ASNasdaq Composite CLOSE 7939.63
PERCENTAGE CHANGE: 52-Wk –1.33 YTD+19.66 Wkly –2.19
570
625
680
735
O N D J F M A M J J ASBarron’s 400 CLOSE 674.65
PERCENTAGE CHANGE: 52-Wk –12.08 YTD +10.65 Wkly –1.40
Source: Barron’s Statistics