Stock Markets Calm Amidst Impeachment Inquiry Storm

  • Presidential Impeachments and Stock Markets

  • Trade Talks to Resume in October

  • 5 Financial Planning Tips for Your 30s

  • Looking Ahead to Auto Sales and Unemployment

Despite the announcement of a presidential impeachment inquiry, stocks barely budged this week and major market indexes remain about 2% off of their all-time highs.

Whether or not a sitting president is impeached can have significant consequences for our country’s governance, the political environment we find ourselves in, and even the policies that impact our economy and markets. But, from a dispassionate investment perspective, we know that past impeachments have been non-events for investors like us.

For the year through Thursday, the Dow Jones Industrial Average and the broader S&P 500 have returned 17.4% and 20.6%, respectively. The MSCI EAFE index, a measure of developed international stock markets, is up 12.9%. As of Thursday, the yield on the Bloomberg Barclays U.S. Aggregate Bond index has dropped to 2.29% from 3.28% at 2018’s end. On a total return basis, the U.S. bond market has gained 8.4% for the year.

Presidential Impeachment and Stock Markets

Thankfully, when it comes to impeachments, there is very limited historical data to review. We don’t have useful market numbers for the 1868 impeachment of President Andrew Johnson, and even if we did, the markets were so different 150 years ago that a comparison would be all but useless. This leaves us President Nixon’s pre-impeachment resignation in 1974 and President Clinton’s impeachment (and Senate acquittal) in 1998.

In this scant history, what drove investor returns were not the impeachment inquiries at all but the overall trends in the economy and the markets.

In this scant history, what drove investor returns were not the impeachment inquiries at all but the overall trends in the economy and the markets.

When President Nixon resigned, the U.S. economy was in the midst of a recession, with stocks already in a bear market. Stocks continued to fall in the months immediately following his resignation, but that might have happened regardless. Notably, the S&P 500 reached a bottom soon after Nixon departed. One year after Nixon’s resignation the S&P 500 (not counting dividends) was up 12%.

Source: S&P Dow Jones Indices.

Source: S&P Dow Jones Indices.

The opposite scenario unfolded when President Clinton was impeached. The S&P 500 had been in the midst of a bull market, though it had wavered a bit due to a currency crisis in emerging markets. But the S&P had already resumed its upward climb before Clinton’s impeachment, and it continued to rise after. One year later, the S&P 500 was up 19%. 

Source: S&P Dow Jones Indices.

Source: S&P Dow Jones Indices.

Investment lesson: Don’t conflate impeachment furor with investment action. While we will watch the process closely on your portfolio’s behalf, we won’t make the error of letting political dysfunction lead to portfolio disruption. The good news: Our investment discipline is unimpeachable.

For more on the limited impact of politics on investment results, please read our Focus on Market Cycles, Not Election Cycles report.

Trade Talks to Resume in October

President Trump dialed back his bellicose rhetoric at the United Nations General Assembly this week, taking a firm but moderately more lenient line with particular regard to Iran and China.

For its part, China granted waivers this week allowing several domestic companies to restart purchases of American soybeans—its biggest U.S. import—a good-faith gesture ahead of high-level negotiations between the two countries set to resume October 10.

In his U.N. talk, Trump said that a deal could happen “sooner than you think.” We continue to think that an agreement will be struck, eventually, but meaningful changes—such as reforms to China’s laws regarding intellectual property—are still a long shot. And any progress remains prone to being upended by a tweet. Stay tuned.

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5 Financial Planning Tips for Your 30s

Say goodbye to canned tuna and ramen and hello to gray hair: As you enter your 30s, your near-term responsibilities and long-term obligations expand. Starting a family, contemplating homeownership and earning enough money to consider investing it all come with the territory.

Here are five tips to those in their 30s to get started on the path to securing their financial future. (We’ve included some links below to additional resources and materials provided by our parent company, Adviser Investments.)

1. Don’t Forget the Fundamentals. The same financial planning tips for your 20s apply:

2. Protect Your Assets. As your earnings and assets grow, protecting them becomes more important—and that means making sure you have adequate insurance. Disability insurance can help protect your salary if you are unable to work. And life insurance can help provide for your loved ones’ future if you pass away. For further guidance on figuring out how much insurance you should have, please read “Life Insurance Made Simple” and listen to this podcast episode on insurance needs—Insurance Through the Ages: What Coverage Do I Need Now?

3. Manage Your Debt. Whether you’re buying a home or buried in student loans, getting debt under control is a crucial component of the budget for most 30-somethings. One rule of thumb we like is the “36-28-20” rule. The rule suggests keeping total debt below 36% of your total gross income, housing expenses (mortgage/rent/taxes/insurance) below 28% of your gross income and credit card debt and other loans below 20% of net income. (This can be more difficult if you live in a city.)

4. Plan for the Worst. If you were in an accident, who would take responsibility for making your health care and financial decisions? How would your car loan and mortgage be paid? If you have children, who would take care of them and would they have sufficient funds to do so? A proper estate plan will provide answers to these questions. Some resources you might want to consider include this Estate Planning Checklist as well as our 10 Essential Questions to Ask an Estate Planning Attorney report and 5 Key Questions: Finding the Right Estate Attorney for YOU podcast episode.

5. Keep Dreaming Big. Your 30s are often a time of taking on increasing responsibilities (and the tips above should help you manage them). But they’re also a time to work toward your dreams. Whether it’s owning your own business, sending your kids to college or retiring to a beach in Bali, this is the time to call in an experienced financial planner to customize a road map to help you achieve your lifelong goals.

These five tips are applicable to anyone in their 30s. But it’s also important to recognize that everyone’s situation is unique—please seek advice from an experience financial planner if you have questions about how to take better control of your finances.

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Looking Ahead to Auto Sales and Unemployment

Next week, expect the political headlines to remain front-and-center. Meantime, we’ll be looking closely at reads on manufacturing, construction spending, auto sales, the service sector, factory orders and jobs, including the September data on unemployment and job creation.

If you’d like to learn more about our tactical or fundamental investment strategies, please contact Steve Johnson at 844-587-7393 or info@bravercapital.com.

Please note: This update was prepared on Friday, September 27, 2019, prior to the market’s close.

This material is distributed for informational purposes only. The investment ideas and opinions contained herein should not be viewed as recommendations or personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.

Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged. 

This material is distributed for informational purposes only. The investment ideas and opinions contained herein should not be viewed as recommendations or personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.

Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged. 

Past performance is not an indication of future returns. We do not provide legal or tax advice, nor sell insurance products. Tax, legal and insurance information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice, or as advice on whether to buy or surrender any insurance products. Always consult an attorney, tax professional or licensed insurance professional regarding your specific legal or tax situation, or insurance needs. Braver Capital Management, an Adviser Investments, LLC company is not licensed to sell insurance products.

Companies mentioned in this article are not necessarily held in client portfolios and our references to them should not be seen as a recommendation to buy, sell or hold any of them.

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