Wednesday, May 17, 2017

Quote of the Day: The term "Watergate" got you jumpy?

From Bespoke Investment Group's morning commentary (also, I shot a 5 minute video on past US political turmoil and the market that I'll be sending shortly [the YouTube upload is very slow this morning]):
The term “Watergate” has been thrown around a lot to describe recent events. Whenever any mention of Watergate comes up, you can forgive investors for becoming a bit jumpy. The S&P 500 fell nearly 50% between the week prior to the sentencing of the first five Watergate burglars in January 1973 and the month after the resignation of President Nixon. Of course, it’s ludicrous to pin that whole drop on Watergate. Inflation was making a parabolic move to double-digits YoY as the US economy choked on the 1973-74 oil embargo by OPEC in response to US foreign policy supporting Israel. The economy entered recession, and the unemployment rate spiked as high as 9%. President Nixon had rescinded gold convertibility of the dollar (dropping the gold standard, back in 1971. So to reiterate: it’s not the same, and nobody should expect a 50% decline in the US stock market on political headlines alone! Also, remember that back in 1998/1999, the Clinton-Lewinsky scandal and subsequent impeachment proceedings had little ultimate impact on equities.
As much as we like to focus on the day to day drama out of Washington, the financial markets are much bigger. That hasn’t changed with the most recent revelations, and the tiny fraction of decline we saw last night hardly foretells calamity ahead.
Emphasis mine... 

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