Skip to main content

History Repeats: Lies, Impeachment and Markets!

The double negative verdicts of Aug 21 may be considered as start of end of Trump Presidency. Only history would tell us significance of events happened on that day. Almost exactly 20 years back, political news were filled with special counsel Ken Starr and possible impeachment of President Clinton. Now it is Muller and Trump filling the political news. Special counsel Muller may file his report sometime later this year and democrats may gain control of house triggering possible impeachment process of President Trump. So what impact will it have on markets? Looking back, markets in 1998 fell nearly 20% leading to release of Starr's report. But once report was out and actual impeachment process started in Nov, markets regained all the losses and some more. It gained 28% by the time senate acquitted President Clinton in early 1999. While Clinton became lame-duck in last 2 years, markets continued to gain momentum during dot.com era. Looking at this history, what could happen this time?
Markets reached all time high this week. That means markets are already discounting possible outcome for Trump. Whatever happens to Trump, economy would remain strong for next 3-4 quarters. Markets may become nervous leading to release of Muller report but they will recover after the event. In some scenario, Trump getting wrapped up in impeachment drama may turn out to be positive when it comes to trade war. Republicans would start speaking openly against Trump. Economy would keep its momentum. Fed will become careful in raising the interest rates (due to political drama). So overall markets would be ok during potential impeachment drama similar to what happened in 1998/1999. But one must be careful. The way history is repeating for political drama, it can also repeat for market drama. We all know how dot.com bubble burst in 2000. So when it comes to 2020, watch out for  repeat of 2000 dot.com bust. And this time also most likely it would be due to Tech. The indication of this would be when Tech sector weight in S&P crosses 30-32% (currently it is at 26%. During dot.com bubble, it reached 34%). Till then, let the party continue!

Comments

Post a Comment

Popular posts from this blog

2025 = Is it going to be 1997 or 2000?

Happy Holidays... After 5 months of hibernation with no real reason than writing block, I decided to use quiet morning of Christmas day to start writing again. Lot has happened in last 5 months - in particular release of Animal Spirits with Fed starting interest rate reduction cycle and historic victory of President Trump for 2nd term. As the year turns into 2025 and stock markets at all time high, one would wonder, what's next?  To answer this, one needs to look back at 1920s and 1990s to give us some context on where markets may be headed. 1920s saw invention of televisions, radio, wider adoption of cars, vacuums, penicillin and many other which we consider household items now. These inventions created roaring 20s with markets going up by 500% eventually leading to crash of 1929. However during mid-20s, markets keep going up due to excitement of these inventions and end of World War-1 and Spanish Flu Pandemic. 1990s also saw many inventions - the key being launch of Netscape in 1...
Post a Comment
Read more

Elections and Rotations!

2024 will be known as an important year in terms of elections (97 nations covering half the population) across the major countries in the world. We are only halfway thru the year and already some key nations have gone thru elections and voters have indicated their preference for change (in a way). Let's take a look at few. India - Modi's BJP started with lots of enthusiasm with slogans of "Modi ki Guarantee" and "400 paar" (more than 400) seats (out of 543). Indian voters (which I considered one of the most smartest) gave reality check to Modi and BJP by reducing BJP count to 240 (from 303 in previous parliament) forcing it to form coalition government. I have lot more detailed hypothesis on these results (but not here). Almost everyone (including me) got their predictions wrong and lost some friendly bets. Indians want balance between "Strong, Prosperous, Proud" India with "Inclusive, Employment and Harmony". Modi and BJP are quick learn...
Post a Comment
Read more

And the Oscar goes to...

It's Oscar Sunday and time for predictions for few categories - before I digress into talking about drama in DC or markets.  First of all, I want to recognize the damage LA fires have done to the beloved areas of Los Angeles and impacted families across all spectrums. My heart goes out to them and wish them recovery and rebuilding of their lives... This year's Oscar nominees and post nomination period had been interesting to say the least. Due to this, the field is wide open in almost all categories and that's what makes prediction game so interesting. Just to set expectations, I would consider a win if I get even 50% predictions correct given the dynamics of nominees this year. So here are my predictions - "And the Oscar goes to..." Best Picture - Anora (surprise could be "The Brutalist") Best Director - Sean Baker for "Anora" (Surprise could be Brady Corbet for "The Brutalist") Best Actor - Adrien Brody for "The Brutalist"...
Post a Comment
Read more