“If you mix your politics with your investment decisions, you’re making a big mistake.”
~ Warren Buffett
Donna (my bride) and I took the boys to this virtual “drive-in movie” at the local rec center last night. They used boxes to build their own “cars” that they could sit in, while eating popcorn, drinking Capri Sun’s, and watching “The Santa Claus” with Tim Allen. I’d never seen the 90’s holiday flick, and it was okay, but then again, this event wasn’t designed for a 41-year old, and no… I didn’t build a box car.
After stuffing the boxes in the back of our SUV, bringing it inside, and trying to find a good place to put it where there wasn’t already a mess of toys or (ironically) a box “house” that Kamden built recently, my phone was buzzing in my pocket and I figured it was just a family group text message thread. After we tucked the kids in bed, I headed downstairs and looked at my phone. The headline on my CNBC app was, “President Trump is impeached in a historical vote by the House, will face trial in the Senate.”
Whoa… so much for binging on Netflix all night.
The first thing I did was take a look at the (stock index) futures. I wanted to see whether or not the market was responding negatively to the news, but nope… nothing. Futures were pretty much flat, and they were only marginally lower as I started writing this article at 8am in the morning (EST). I had some things come up that interrupted my writing, but here’s a full, updated, overnight look at the S&P500 futures both before and after the market opened this morning:
As you may already know, the stock market despises uncertainty. Another thing that can rock the market is big, sudden change. This is one of the reasons why stocks tend to do well when we have a divided government (when the House and Senate are controlled by different parties). Why? Well, because politicians can’t get anything done!
This is only the third time in history that a U.S. President has been impeached, but it’s important to understand that the big, potential game-changer hasn’t occurred just yet. Trump needs to face the Senate, and the trial isn’t expected to begin until early January. There’s no telling how long it will last, but President Clinton’s impeachment trial ran to the tune of around five weeks, which gives us a reference point.
Below is a chart of the stock market just before and after the House impeached President Clinton. While there were surely many investors freaking out, clearly there weren’t enough people hitting the “sell button” to make a dent in the uptrend at the time:
Keep in mind, both Presidents Andrew Johnson and Bill Clinton were acquitted, and it’s largely expected that Donald Trump’s trial will end in the same fashion. Assuming this is the case, if we scan forward in time, after the day of Clinton’s initial impeachment, through the Senate trial, and after the acquittal, what we experienced in 1998-99 was a pretty strong uptrend heading into the 2000 tech boom and market peak.
Against the odds, if Trump is removed from office, this would be an enormous, unprecedented game-changer for both the economy, as well as the stock market. It would create immense uncertainty with less than a year before the next Presidential election, and there’s no doubt in my mind that we would expect to see an increased level of volatility in stocks.
All that being said, please re-absorb that healthy reminder from Warren Buffett, above – to ignore politics when making investment decisions! Unless you have a crystal ball that works (I have one in my office, but it’s defective), it would be unwise to sell out of the market prior to the Senate trials in anticipation of Trump being removed from office. I’ve seen many investors try to anticipate the future and barring a stroke of rare, but incredible luck, I have yet to observe anyone predict the future with any consistency.
From what I can see below, the market is in a crystal-clear uptrend on almost every timeframe. Selling here would be a guessing game – and guessing is not a good retirement planning strategy!
As Isaac Newton once said, an object in motion tends to remain in motion until acted upon by an opposing force. So until an opposing force inhibits and changes the direction of this uptrend in the market, we’ll continue swimming with the current, not against it.
In closing, this will be my final article for 2019 as I take a break to spend some high-quality, intentional time with my bride and two boys, Karston and Kamden.
I wish you all a Merry Christmas, Happy Hanukkah, and a warm, relaxing, positive & uplifting New year!
See you in 2020!
Categories: Adam Koos, CFP®, CMT®, Market Commentary