The Markets Care About ONE Thing When It Comes to Impeachment
The markets have been in a cantankerous mood this week, following revelations that Democrats intend to pursue an impeachment inquiry against President Trump.
Whether that’s right or wrong doesn’t concern me. I don’t have the luxury of picking sides in my capacity as Chief Investment Strategist.
My job is to help you make money by accurately assessing the situation and what it means for the world’s markets.
The markets care about one thing and one thing only.
How likely is any impeachment to proceed/succeed, and what does an administration led of V.P. Mike Pence look like?
Okay, technically that’s two things.
Either way, the financial markets are forward looking which means there’s not going to be a lot of spoiled milk spilled about what’s happened in the past.
Democrats will try to force the conversation, but there’s no guarantee that will succeed. In fact, quite the opposite is true in that there will clearly be unanticipated risks!
In fact, traders I’m talking with around the world are already focused on what Pence administration would look like, and how that potentially impacts bets they’ve made on manufacturing, productivity, labor, prices and more.
They – the traders, that is – want growth very simply because that’s great for your money. What they don’t want is a sideshow that distracts everyone from moving ahead.
Profits will suffer and so will the markets. The two are intrinsically linked.
Many folks are already drawing conclusions about similarities to the Clinton impeachment attempt back in 1998 on the assumption that the market will rally but I think the real comparison is the leadup to Nixon’s resignation in 1974… ahead of actual impeachment. Then, as now, the market had peaked… back then in 1966 a full 8 years earlier …this time around only 11 weeks earlier.
The stock markets were already under pressure from the 1973 Arab-Israeli War, inflation, spiking oil prices and the collapse of the so-called “Nifty Fifty” stocks… remember those??!!
This time around the concerns are related to a slowdown in global growth and the card being played is that the President withheld aid to Ukraine while demanding the investigation of Democratic candidate and Former VP, Joe Biden and his son, Hunter, who was hired by a Ukrainian gas company even as the older Biden sought to deepen ties with that nation. At issue is whether Biden represented his interests or those of our country.
I have no idea and no opinion one way or the other – so let’s get that off the table. Again, I don’t have the luxury of picking sides politically in my capacity as Chief Investment Strategist.
What I worry about is how any impeachment potentially impacts YOUR money.
I think traders sell off ferociously if the impeachment proceedings move beyond fanciful conjecture leading up to the 2020 elections to the possibility of real transgressions. Short of that, impeachment proceedings will be a well-publicized sideshow, characterized by unprecedented and exceptionally vicious headlines, name-calling, posturing, and finger-pointing from BOTH sides.
History shows very clearly that the markets weather short-term corrective moves in accordance with the underlying fundamentals in place at the time of an “event.” Impeachment proceedings are no exception.
Admittedly, the sample size is small… only three prior impeachment attempts… but the point should be one that’s well-taken.
The S&P 500 fell during the Nixon/Watergate era, but rose after a short-term hiccup during the Clinton/Lewinsky episode. Market data from 1868 when Andrew Johnson was impeached is inconclusive, a fact that’s not surprising, considering that stock tickers were introduced only a year earlier, and he was never convicted.
That’s why you want to make sure you are constantly focused on protecting your profits and your capital by constantly harvesting big winners when they hit specific profit targets and jettisoning them when they bump up against trailing stops you have in place at all times.
If you are a paid subscriber to any of my sister services, this should sound very familiar because we’ve been gradually tightening up both profit targets and trailing stops for months ahead of the possibility of more volatility. We’ve also been harvesting profits.
Carefully review your holdings – and I mean ALL of ’em – right now, with an eye on which stocks, funds, and ETFs you’re going to keep, which ones you’re going to sell if the markets force your hand, and, importantly, which ones you’re going to buy more of if the markets give you that opportunity.
Right now, I’m particularly interested in defense, medical technology, and traditional big tech, for example. They’re the companies and sectors that can protect margins and grow despite the possibility of political turmoil.
Quite literally, I think that’s “worth” a lot at the moment.
Speaking of which, I’ve just recommended two new companies perfect for today’s market conditions and the potential impact of impeachment hearings in the Money Map Report. There’s plenty of time to make your move on these stocks, for now at least. You can learn more by clicking here.
Until next time,