How the Stock Market Performed During the Clinton Impeachment

During an impeachment trial prompted by the Lewinsky sex scandal, presidered over by Chief Justice William Rehnquist (1924 - 2005) (center rear), the United States Senate votes on articles of

(Image credit: 2003 Getty Images)

Investors might be concerned that the impeachment trial of President Donald Trump, which began Thursday, Jan. 17, could cast a pall over the stock market's recent run to all-time highs.

But if past is prologue, the market will shrug this off. In fact, it might even generate enviable returns.

That's what happened last time, anyway.

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As you may recall, President Bill Clinton was embroiled in a scandal of his own that ultimately led to his impeachment by the House of Representatives and a trial in the Senate. That was a bit more than 20 years ago during the peak years of the dot-com boom.

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The height of the Clinton impeachment ran from Dec. 19, 1998, to Feb. 12, 1999 – the date the House approved two articles of impeachment, to the date the Senate announced his acquittal. During that period, the blue-chip Dow Jones Industrial Average gained 4.2%. The broader S&P 500 rose 3.5% on a price basis.

That's a heck of a return for less than two months of market action.

Interestingly, stocks were no more volatile during the Clinton impeachment. They just chipped in steady gains during what was a heady time for the country.

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During the two-year period of 1998 and 1999, the cyclical bull market was on fire. The Dow rose 45% from the beginning of 1998 to the end of 1999. The S&P 500 jumped 51%.

And as for the tech-heavy Nasdaq Composite, the star of the late '90s tech boom? It gained 159%.

As we now know, irrational exuberance fed an epic bubble in share prices that would pop in early 2000. But there were real underlying reasons for investors to go a little nuts. Namely, the economy was zipping along in high gear. In 1998 gross domestic product increased 4.5%. In 1999, it accelerated to 4.8%.

The economy was as healthy as it had been in a long time, and inflation was around the goldilocks level of 2%. U.S. corporate operating earnings – the mother's milk of share prices – were forecast to grow 16.4% in 1999.

This year’s impeachment trial comes against a somewhat similar backdrop, albeit a more modest one. The economy is growing steadily, though at a slower rate than it was back then. Analysts forecast earnings growth of between 4.5% and 6.5% for the first half of 2020. And inflation is negligible.

Oh, and we're in the midst of the longest expansion and bull market in history.

It likely will take a lot more than some drama in Washington to tank this market.

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Dan Burrows is Kiplinger's senior investing writer, having joined the publication full time in 2016.

A long-time financial journalist, Dan is a veteran of MarketWatch, CBS MoneyWatch, SmartMoney, InvestorPlace, DailyFinance and other tier 1 national publications. He has written for The Wall Street Journal, Bloomberg and Consumer Reports and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among many other outlets. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange.

Once upon a time – before his days as a financial reporter and assistant financial editor at legendary fashion trade paper Women's Wear Daily – Dan worked for Spy magazine, scribbled away at Time Inc. and contributed to Maxim magazine back when lad mags were a thing. He's also written for Esquire magazine's Dubious Achievements Awards.

In his current role at Kiplinger, Dan writes about markets and macroeconomics.

Dan holds a bachelor's degree from Oberlin College and a master's degree from Columbia University.

Disclosure: Dan does not trade individual stocks or securities. He is eternally long the U.S equity market, primarily through tax-advantaged accounts.