NuWave Investment Management – Politics & Markets
“It’s called political economy because it has nothing to do with either politics or economy . . .”
– Stephen Leacock (1869 – 1944)
Article 1 of the United States Constitution grants the House of Representatives the sole power of impeachment, while reserving for the Senate the sole power to try any such impeachment. Furthermore, Article 2 sets forth the bases on which the President is to be judged, listing treason, bribery or other high crimes and misdemeanors as the sole impeachable offenses; curiously, the precise meaning of “high crimes and misdemeanors” is not defined in the Constitution itself. However, Federalist 65, written by Alexander Hamilton and first published in March of 1788, broadly (and somewhat ambiguously) defines an impeachable offense as arising from “the misconduct of public men, or in other words from the abuse or violation of some public trust”; in fact, Hamilton expressly states that an impeachable offense may be political in nature and need not be a prosecutorial (i.e., criminal) offense. Perhaps former House Minority Leader and later President Gerald Ford defined the impeachment process best when he said, “an impeachable offense is whatever a majority of the House of Representatives considers it to be at a given moment in history.”
Given the many vagaries associated with the term “high crimes and misdemeanors,” it is not surprising to note that the impeachment process has historically been an exercise in the art of political theater; fortunately, the political sideshow that so often accompanies impeachment hearings has had little, if any, effect on the financial and commodity markets. For example, though derailed by the resignation of President Richard Nixon in August of 1974, the impeachment inquiry surrounding Watergate had little to do with the “lost decade” that ultimately defined the U.S. economy throughout much of the 1970s; rather, economic stagflation and a global energy crisis all but crippled the U.S. economy and weighed on equity prices. More recently, the impeachment of President Bill Clinton in December of 1998 barely caused a ripple across the major equity markets; following the emerging market meltdown earlier that year, the U.S. equity markets surged as the Federal Reserve eased monetary policy and investors scrambled to buy internet stocks amid the tech bubble of the late 1990s.
While only time will tell if the potential impeachment of President Donald Trump is more sideshow than substance, the fallout from the impeachment inquiry and any subsequent hearings will likely pale in comparison to the potential ill effects of a destabilizing escalation in the trade war with China, an unanticipated surge in U.S. inflation data (which would, in turn, force the Federal Reserve to tighten rates in an aggressive fashion) or a continuation of the profligate spending policies of a spendthrift Congress. Ultimately, markets either rise or fall based upon the underlying health of the economy – not the political drama being staged in some Congressional hearing on Capitol Hill – and it is likely that the economic policies pursued by the Trump Administration (e.g., tax cuts, jobs growth, fair trade, rising corporate earnings, deregulation, etc.) have made the U.S. economy – and the U.S. stock market – more resilient to all manner of near-term shocks . . . even political ones.
Credit to: NuWave Investment Management a boutique Commodity Trading Advisor.
Since its inception in 2000, NuWave Investment Management has combined ingenuity, insightful research and cutting-edge technology to successfully navigate the complexities of global investing. Our unique multi-strategy approach to investing in many of the world’s most liquid financial and commodities markets offers investors the potential to achieve risk-adjusted returns (with commensurate risk) in a variety of market environments, while also providing diversification and non-correlation benefits relative to both traditional investments and other hedge fund strategies.