As we approach the Labour Day weekend, I simply cannot believe where the time has gone! I blinked my eyes and it was July 1st...and now I have blinked again and it is August 30th. I wish I could say I did something interesting this summer, but I didn't. I guess I better get myself in gear for an interesting fall!

 

But, then again I may not have to do anything interesting as the stock market may do it for me! 2018 is the year of mid-term elections in the United States. Along with the election, there are now comments being made about a possible impeachment of President Trump....hmmmm. So, in light of the events ahead of us, I am going to make some comments and remind everyone that impeachment is not an event, but rather a process. If it happens, it will involve several judicial and institutional steps. These steps will include some of the following: The Democrats must take the House in November in order to take control of the Judiciary Committee. It would then be the Judiciary Committee that would consider articles of impeachment. The timing would occur in January 2019 when the new Congress takes its seat. The Senate must also vote by a 2/3 majority to convict the President. Robert Mueller's investigation into Russian interference in the 2016 election campaign must show material findings.

 

So now guidance....what could we potentially see if a "constitutional" crisis should arise? History shows that there were only 2 presidents in the US that were actually impeached: Andrew Johnson and Bill Clinton. Andrew Johnson, the 17th President, was accused of violating the Tenure of Office Act and other crimes. Bill Clinton, the 47th President, was impeached for allegedly misleading a grand jury about his extramarital affair with Monica Lewinsky. So, this means that only 2 presidents were actually charged by the House of Representatives with committing "high crimes and misdemeanors". Neither one of them were convicted by the Senate. Richard Nixon, the 37th President, was CERTAIN to be impeached and convicted in 1974, but he resigned before he was to face prosecution over what is now known as the Watergate Scandal. An impeachment resolution for John Taylor, the 10th President, was introduced into the House of Representatives, but this initiative also failed. The impeachment process in the United States is one that has been used sparingly and there must be an extraordinary burden of proof. The offenses for impeachment are spelled out in the Constitution of the United States and the words you would find include: treason, bribery, or other high crimes and misdemeanors.

 

So now what....the next step is to understand what happened to the stock market during those extraordinary times. During the Bill Clinton impeachment process of 1998-99, the stock market did fairly well. But, the market performance during the impeachment process of Richard Nixon was poor, declining by 23% and it took several months to occur.

So folks, step back and look at this differently. Don't judge the stock market on a "random event". Let's just look deeper. While there is a backdrop of good economic growth supported by a solid labour market, this information is already discounted in the current share prices. That being said, the current share prices may be at the high end relative to their earning power. NOW, we have a reason to do something. I think it would be prudent to consider being protective. Raise a little more cash and/or move to short term bonds or switch to defensive stock positions this fall. Give yourself some buying power. Don't make a radical move to "sell everything"....Just be careful!