President Trump has taken credit for surging U.S. stock markets more than once since he moved into the Oval Office. Now, he says they’ll crash if he’s forced out.
The reality, however, is more complicated. It’s true that his forced exit would probably cause short-term swings in both the broad S&P 500 and the blue-chip Dow Jones Industrial Average, which have climbed 34 percent and 40 percent, respectively, since Trump’s November 2016 election.
Those would probably even out with Vice President Mike Pence in the Oval Office, however, especially if Republicans maintained control of Congress in midterm elections in November. And history shows Wall Street weathering impeachment proceedings against two of Trump’s predecessors in the past 50 years, Richard Nixon and Bill Clinton.
“Historically, when we’ve seen situations that have involved presidents or other senior leaders where they were removed from office, there may be a short-term reaction, but the market quickly starts to look forward,” said Wayne Wicker, who oversees $28.8 billion in retirement plans for Washington-based ICMA-RC. “Markets tend to overcome that in one or two months.”
Whether Trump, a real estate mogul without prior political experience, might be impeached if Democrats gain even partial control of Congress has been the subject of mounting speculation this week: His former personal attorney, Michael Cohen, pleaded guilty to a campaign finance law violation that he said was ordered by the then-candidate on Tuesday, and his former campaign manager, Paul Manafort, was convicted of charges including bank fraud and tax-code violations the same day.
[Dershowitz: Trump safe from impeachment so far]
The president, who has blamed both cases on what he calls a “rigged witch hunt” by special counsel Robert Mueller, weighed in on Fox News on Thursday morning by citing economic growth that he said former Democratic rival Hillary Clinton couldn’t have delivered.
“I don’t know how you can impeach somebody who’s done a great job,” Trump said in an interview taped at the White House.
“If I ever got impeached, I think the market would crash; I think everybody would be very poor,” he continued. “Without this thinking,” Trump said, pointing at his head for emphasis, “you would see numbers that you wouldn’t believe, in reverse.”
Fallout that severe hasn’t occurred in previous reversals of political fortune.
In the eight months of 1974 through Nixon’s Aug. 9 resignation, for example, the Dow fell 7.8 percent. Its decline for the full year was 28 percent, one of the worst annual drops on record at the time, though still better than either of the first two years of the Great Depression or the year that World War I began.
The Dow recovered all of those losses in 1975, and then some, though a confluence of factors including the end of the Vietnam War, surging inflation and the Arab oil embargo against the U.S. making pinpointing the precise causes of fluctuations in the early 1970s difficult.
A quarter of a century later, the blue-chip index surged 16 percent the year that a Republican-controlled House approved articles of impeachment against former President Bill Clinton and 25 percent the next year, when the Senate decided not to remove him from office.
The Dow actually rose nearly 1 percent on the first trading day after the House vote, despite Clinton’s high approval rating: One poll found a 10-point jump to 73 percent after the decision.
[Opinion: Trump doesn’t deserve impeachment (but he should resign)]
In Trump’s case, “I don’t think anybody really knows” what would happen, said Luke Tilley, chief economist at Wilmington Trust, who noted that markets were widely expected to drop if Trump won in 2016 and that futures sank before the start of regular trading the day after his victory.
Typically, however, investors look beyond a political action such as impeachment to the broader drivers of the market’s performance and evaluate which of them would be affected by the president’s departure.
The key reasons for the U.S. markets’ surge under Trump are the corporate tax cuts and looser regulations enabled by Republican control of both Congress and the White House, he said. If Pence succeeded Trump in the Oval Office, barring other changes, the market fallout would likely be limited, Tilley said.
“What would be more momentous for the market,” he added, “would be the ripple effects if impeachment led to a Democratic wave in the following elections and Democrats took over the House, the Senate and the presidency.”
