Lies, cover-ups, payoffs and investigations - from the president’s sex life all the way to his campaign's finances. Add to that, a tariff war and possible collusion with another nation effecting our election. The word impeachment has floated around as well. Investors are anxious and worried about all these uncertainties in the market and are looking for some direction.
Believe it or not, all these market headlines occurred over twenty years ago with then President, Bill Clinton. As they say, history tends to repeat itself, but let’s review some of the issues that were in the news back then.
Tariff War - President Bill Clinton initially took a hardline approach on the U.S. trade deficit with Japan and prioritized extracting economic concessions from Tokyo. Originally, the Clinton Administration placed a 100 percent tariff on 13 luxury car models.
Bill Clinton’s reelection campaign - The Washington Post reported in 1998 that “evidence gathered in federal surveillance intercepts has indicated that the Chinese government planned to increase China’s influence in the U.S. political process in 1996.” A 1998 Senate Government Affairs Committee report on the scandal found “strong circumstantial evidence” that a great deal of foreign money had illegally entered the country in an attempt to influence the 1996 election. The DNC was forced to give back more than $2.8 million in illegal or improper donations from foreign nationals. The sprawling fundraising scandal ultimately led to 22 guilty pleas on various violations of election laws.
The Lewinsky scandal - The sexual relationship took place between 1995 and 1997 and came to light in 1998. Clinton ended a televised speech in late January 1998 with the statement that he "did not have sexual relations with that woman, Miss Lewinsky". Further investigation led to charges of perjury and to the impeachment of President Clinton in 1998 by the U.S. House of Representatives. He was subsequently acquitted on all impeachment charges of perjury and obstruction of justice in a 21-day Senate trial.
The Whitewater controversy - This was an investigation into the real estate investments of Bill and Hillary Clinton and their associates, Jim McDougal and Susan McDougal, in the Whitewater Development Corporation. This failed business venture was incorporated in 1979 with the purpose of developing vacation properties on land along the White River near Flippin, Arkansas. David Hale, the source of criminal allegations against the Clintons, claimed in November 1993 that Bill Clinton had pressured him into providing an illegal $300,000 loan to Susan McDougal, the Clintons' partner in the Whitewater land deal. Neither Bill Clinton nor Hillary were ever prosecuted, after three separate inquiries found insufficient evidence linking them with the criminal conduct of others related to the land deal.
However, history tells us that financial markets are capable of absorbing a great deal of negative news and pricing in that information accordingly (arguably, the biggest issue markets confront is uncertainty). This was extremely evident during the Clinton Administration.
One of President Clinton’s most economically significant acts as president was to sign the North American Free Trade Agreement, which revitalized the North America trade block. All told, President Clinton presided over the longest peace-time economic expansion in U.S. history, and logged a budget surplus for the last three years of his presidency. Equities climbed nearly 150 percent during the Clinton Administration.
Source: https://www.cheatsheet.com/money-career/presidential-stock-market-scorecards-reagan-to-obama.html/
So, while these news headlines can be scary and cause uncertainty in the world, we are reminded that even these headlines are nothing new to the market. History tends to repeat itself. Markets go up, they go down, and historically – they go back up again.
My advice to you is to shut off this short term “noise” and focus and your long-term goals – whatever they may be. It is easy to say, “but it is different this time” and some things are. For example, Bill Clinton never used Twitter. I am also sure that there will be something “new” that will come along in the next decade that will scare a lot of us as well, something that we have not even thought about or even maybe something that has not even been created yet.
It is a normal reflex when you get fearful to go into preservation mode and want to “put all in cash”. The problem when you do that is when do you get back in? By the time things settle down and the future becomes clearer, the stock market has already moved up and you missed your opportunity to get back in, which is why we have a buy and hold mentality at New England Capital.
As always, please feel free to call us when you feel uneasy or have questions on how we are managing your hard-earned money. For now, sit back, relax, and watch history repeat itself!
