24 May 2017
Over the past week Australian shares were 1.3% lower. Shares in developed countries were flat
with the US market down 0.1%. Shares in emerging markets were 1.0% lower. The Australian
dollar rose 0.7% to 74.78 US cents. The 10 year bond yield in Australia was 5.3% lower at 2.44%
while in the US, the 10 year bond yield closed 2.0% lower at 2.23%. The oil price rose 5.8% to
51.47 US dollars per barrel.
The headlines are all about the possible impeachment of US President Donald Trump. This is used
by market commentators as an explanation for why markets have sold off a little. In this weekly
investment update we explain impeachment, the historical impeachments of US Presidents and
the impact on markets.
The United States Congress consists of two chambers; the Senate and the House of
Representatives, operating in a similar way to Australia’s parliament. The House of
Representatives, which is the lower house of Congress, has the power that allows formal charges
to be brought against a civil officer of government, even a President, for alleged crimes.
Impeachment can concern alleged crimes while in office or prior to taking office. Trials are
conducted by the Senate which is the upper house of Congress.
Past impeachments of US Presidents include:
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President Andrew Johnson (1865-1869) was impeached in 1868 for breaking the Tenure of
Office Act. The claim was that he illegally dismissed a member of staff who he didn’t get on
with. The impeachment trial narrowly overturned the impeachment charge by a single
vote.
President Bill Clinton (1993-2001) was impeached in 1998 on two charges, one of perjury
and one of obstruction of justice relating to an extra-marital affair with Monika Lewinsky
and his testimony on that during a sexual harassment lawsuit. Clinton was subsequently
acquitted of the charges by the Senate in February 1999.
Many people assume that President Richard Nixon (1969-1974) was impeached. He was
never technically impeached since he resigned his office prior to the impeachment vote for
crimes and misdemeanors related to the Watergate Scandal in the House of
Representatives.
How did impeachment proceedings affect US stock markets? We’ll consider Presidents Nixon and
Clinton, excluding President Johnson.
t 13 MINE (13 64 63) | f 02 4962 3469 | e [email protected] | mine.com.au
Past performance isn’t necessarily an indicator of future performance. All data sourced from Bloomberg.
*Impeachment numbers sourced from mba.tuck.dartmouth.edu
Issued by AUSCOAL Superannuation Pty Ltd ABN 70 003 566 989 AFSL 246864 Trustee for the Mine Wealth and Wellbeing Superannuation Fund
ABN 16 457 520 308.
From the time impeachment charges were initiated:
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President Nixon - US shares fell 14.2% from 6 February 1974 to the date he resigned from
office on 9 August 1974.*
President Clinton - US shares rose 4.1% from 19 December 1998 to the date he was
acquitted on 12 February 1999.*
The data does not paint a clear cut picture that impeachment leads to market falls. It’s unclear
how things will play out for President Trump. However the uncertainty and potential for a fall
might increase short term market volatility.
We’ve previously downplayed our view of the expected impact of President Trump on the US
economy and the US stock market. If he were to leave office we don’t think the long term impact
on markets would be large.
Signing off
David Bell
t 13 MINE (13 64 63) | f 02 4962 3469 | e [email protected] | mine.com.au
Past performance isn’t necessarily an indicator of future performance. All data sourced from Bloomberg.
*Impeachment numbers sourced from mba.tuck.dartmouth.edu
Issued by AUSCOAL Superannuation Pty Ltd ABN 70 003 566 989 AFSL 246864 Trustee for the Mine Wealth and Wellbeing Superannuation Fund
ABN 16 457 520 308.