and political apocalypticism. And yet the
behavior of stock indices with respect to
impeachment outcomes is mostly languid
between the impeachment date and the
vote date (except for the Clinton impeachment,
which took place during a roaring
bull market) and intraday on the day of
the vote itself.
But this makes perfect sense. For one
thing, impeachments involve a sequential
process, with updates trickling out
over time. As market participants acquire
information, they continually assess and
revise their expectations regarding the
likelihood of conviction and removal
from office: trading and adjusting their
exposure according to their risk appetites.
Unlike terrorist attacks, management
shake-ups or assassinations—each
of which arrive with a shock—impeachments
are characterized by proceedings
through which news is slowly but steadily
incorporated into stock prices: a persuasive
display of the EMH (efficient market
hypothesis) in action. And knowing that
conviction requires a two-thirds majority
TABLE 3: Market Impact of Unexpected End of Presidency
Event Date (in relation to event) Market return (DJIA)
Resignation
Richard M. Nixon 9 August 1974 (next day) –1.30%
Assassination attempts
Franklin D. Roosevelt 15 Feb 1933 (next day) –2.00%
Gerald Ford 22 Sept 1975 (next day) –0.47%
Ronald Reagan 30 March 1981 (same day) –0.25%
Assassinations
Abraham Lincoln –0.70%
James A. Garfield 2 July 1882 (same day) –3.30%
William McKinley 6 Sept 1901 (next day) –6.20%
John F. Kennedy 22 November 1963 (same day) –2.80% (stocks halted)
Section 4, 25th Amendment proxy
Dwight D. Eisenhower 24 Sept 1955 (same day) –6.00%
Average return: –2.56%
A television on the floor of the New York Stock Exchange (NYSE) shows on-going discussion of President
Donald Trump’s impeachment by the House of Representatives the morning after, on December 19, 2019.
Spencer Platt
www.MoAF.org | Summer 2020 | FINANCIAL HISTORY 29