How the Impeachment Process Could Impact the Stock Market

"For impeachment to matter, there would have to be a realistic story that would lead investors to believe that there would be an actual change in power," notes one analyst.

With House Speaker Nancy Pelosi’s announcement of a formal Trump impeachment inquiry, stock markets don’t seem phased. After an opening drop, the S&P 500, Dow 30, Nasdaq, and Russell 2000 are all in positive territory.

But what about tomorrow, next week, month, and on into the coming year? If history is a tutor, things could go really well—or terribly, according to data compiled and sent to Fortune by LPL Financial.

Nixon and Clinton’s mixed results

After Richard Nixon’s near impeachment, only put off by his resignation, the S&P 500 saw a 33% drop in value. But the index shot up more than 39% after the House impeached Bill Clinton and the Senate failed to remove him.

The difference, according to a note from LPL Financial senior market strategist Ryan Detrick, is where the economy already was: “The economy was headed into a vicious recession in the mid-’70s, while the economy was humming along in the late 1990s.”

Things are more mixed these days, with growth still happening but various worrying signs visible. A number of financial professionals who sent notes to Fortune largely thought things would be stable in the long run.

Short-term impact

At first there may be some disturbance. “The primary initial impact of House Speaker Pelosi’s announcement is likely to be negative for both financial markets and the economy alike,” says David Page, head of macroeconomic research at AXA Investment Managers.

“For impeachment to matter, there would have to be a realistic story that would lead investors to believe that there would be an actual change in power,” says Steve Massocca, managing director at Wedbush Securities. “I am not espousing a political viewpoint but rather an investment analysis. The stock market likes Donald Trump and his agenda.” Absent a change in power, things will probably move along as they have been, at least until November 2020.

It may be that, especially with issues of trade with China still looming large, there is currently little of interest for investors in the process. “In the long run, markets [will] tend to shrug off the lengthy impeachment processes, which may be politically fascinating, but have little impact on the economy, policy, and stock market performance,” says Yohay Elam, a currency analyst at FX Street, who also thinks that a removal from office might actually help markets. “[A] President Pence may provide more certainty around trade policy and less erratic behavior.”

Removal, however, is a remote possibility, as Phil Orlando, chief equity strategist at Federated Investors, notes, given that the Senate would need a two-thirds majority to take that action, which seems unlikely with 53 Republicans, 45 Democrats, and 2 Independents. That doesn’t mean smooth sailing immediately ahead. “Uncertainty around U.S.-China trade tensions and Federal Reserve policy top the list, but a number of other factors around the world will come together spookily enough right at Halloween: the Brexit deadline; the Japanese VAT tax decision; the Draghi transition to Lagarde at the [European Central Bank]; and Germany’s Q3 GDP flash report indicating whether their economy has slipped into a technical recession,” Orlando writes.

Instability becomes a shield

What may be the oddest stabilizing factor is that so much of Trump’s time in the White House has been controversial. “This does not mark a new sort of enquiry and there are, and have been, several Committees investigating the President over recent years,” Page says.

And any lack of progress—as the White House has threatened to refuse to cooperate in any legislative process during an impeachment inquiry, as Roll Call reported—could be a plus for markets as it “could serve to mitigate risk,” according to a published note from Raymond James Equity Research.

Plus, it could be a boon for politicians. “The more political uncertainty there is, the more I would expect major corporations, such as Goldman Sachs, to further hedge their bets by donating to politicians on both sides of the aisle,” says Daniel Smith, associate professor in the Department of Economics and Finance at Middle Tennessee State University.

More on impeachment:

—What is CrowdStrike? Trump mentioned the company in his Ukraine call
—What the latest polling tells us about public support for impeachment
—These are the key players in the Trump impeachment inquiry
—How impeachment momentum massively shifted among democrats
—The 25 most powerful women in politics

More from finance:

—Sanders vs. Warren: How their wealth tax plans differ
—What’s the difference between a recession and a depression? Here’s what history tells us
—Why the next recession may feel very different than 2008
—Why the repo market is such a big deal—and why its $400 billion bailout is so unnerving