Market Commentary for Week Ended 9/27/2019

IMPEACHMENT.  President Trump on Thursday warned voters “If they actually did this (impeached me) the markets would crash.  Do you think it was luck that got us to the best Stock Market and Economy in our history?  It wasn’t!”  So classic.  Set aside the capitalization and punctuation errors, Trump's statement implies that corporate earnings and future earnings growth rely huugely on him.   After all the perception of future earnings growth underpins the valuations of corporations.   The reality is that the market hardly moved when Nancy Pelosi announced an impeachment inquiry this week. 

In my opinion, the house will likely successfully vote to impeach him.  However, the Constitution subsequently requires a two-thirds super majority in the Senate to convict the president.  It is unlikely this threshold will be reached in the current Senate.   Therefore, Trump is likely going to serve out his term regardless of whether he is impeached by the house.

For context let’s look at the market performance during the two impeachment proceedings in modern history Richard Nixon and Bill Clinton (Andrew Johnson was impeached in 1869, and stock market data is limited).

No conclusions about a Trump impeachment can be made from these events.  There are only two data points, thus statistically insignificant, and the economic environments that each operated in were completely different. 

Economic Data Recap:

There were 3 economic data points of interest during the week

1. Q2 2019 Gross Domestic Product (GDP) Report:  GDP represents the total value of the country’s production of goods and services during the period.  Second quarter GDP growth came in as expected, with a growth rate reading of 2.0%.  The pedestrian headline number belies the underlying strength of the consumer.  Consumer expenditures grew at a rate of 4.6% during the quarter!
2. August New Home Sales:  August new home sales came in at 713k versus an expected range between 640k and 685k.  The western region had a surge of 16.5% in the month which helped propel the number above expectations.
3. Durable Goods Order: The month ended August report was a bit disappointing.  The headline reading indicated a 0.2% growth rate versus a consensus range between -2.3% and 1.0% and thus in line with expectations.  However, core capital goods orders (nondefense ex-air) fell 0.2% which missed consensus.  Also discouraging:  the July core reading was revised downward from 0.4% to unchanged.