In the wake of Special Counsel Robert S. Mueller III’s charges against three aides to President Donald J. Trump, clients may be wondering: How does presidential political turmoil affect the stock market?
The answer: Usually not much, or for long. Let’s take a look at some of the biggest presidential shocks and how investors reacted to them.
“The stock market worries only about events that could trigger a recession,” said Sam Stovall, chief investment strategist of U.S. equity strategy for CFRA. “Politics makes for great headlines, but only recessions put a dent into bottom lines.”
August 2, 1923: President Warren G. Harding dies unexpectedly. At the time, Harding was well-liked: Nine million people watched the train that bore his body from San Francisco to Marion, Ohio, where he was buried. Many of the scandals that later tarnished his record were not revealed until after his death.
At the time, the stock market was in bear mode: The Dow Jones Industrial Average had peaked at 105.38 in March, 1923, and hit bottom at 85.76 in October 1923, an 18.6% loss. Consumer prices had been rising since early 1922, and short-term interest rates rose modestly as well. Nevertheless, stock prices rallied sharply in November 1924 as Calvin Coolidge won the presidential election.
April 12, 1945: President Franklin D. Roosevelt dies of a cerebral hemorrhage. The president had been elected for an unprecedented fourth term, beating Thomas Dewey with 432 out of 531 electoral votes. His failing health was not a surprise to investors, and Wall Street, in bull market mode from a booming economy and impending victory in World War II, rose through May 1946.
Sept. 23, 1955: President Dwight D. Eisenhower suffers a heart attack. Wall Street does not take this well: The Dow slides 6.5% on Sept. 26, 1955. The stock market regains its footing quickly, however, and the next bear market doesn’t start until April 1956.
April 11, 1962: President John F. Kennedy, steamed that the steel industry raised prices, comments, “My father always told me that all businessmen were sons of bitches, but I never believed it until now.” The stock market had been declining since December 1961 and Kennedy’s comments convinced Wall street that the young president was anti-business. But Wall Street, comforted by promises of across-the-board tax cuts retroactive to Jan. 1, went on to rally from June 1962 until February 1966.
Nov. 22, 1963: Stocks fall 2.9% on Kennedy’s assassination. The stock market recovers quickly, however, and the bull market continues.
August 9, 1974: President Richard M. Nixon resigns. His woes began much earlier: The Watergate scandal started gaining media traction more than a year earlier. Nevertheless, the Dow falls 15.5% from his resignation to August 29. The market’s trough was in December 1974, a total 45.1% loss – the worst since the Great Depression.
Nov. 13, 1986: The arms-for-hostages deal in President Ronald Reagan’s administration is revealed. Despite the scandal, the market embarks on a sharp rise that only ends with the Crash of 1987.
Sept. 24, 1998 – House Judiciary Committee announces it will consider an impeachment charge against President Bill Clinton, and the stock market falls 2.2% that day. But stocks had just suffered a sharp correction sparked by the collapse of the Russian ruble in August. By the time of Clinton’s impeachment trial, stocks were in a bull market that would last until March of 2000.