Trade the Congressional Effect: How To Profit from Congress's Impact on the Stock Market

President Bill Clinton

At first glance, it would seem that the impeachment of a sitting president would always be bad for our country and therefore bad for the stock market. I am sure that was the political calculation that Congressman Barr and the Republicans in general made when they started the process. However, in the case of President Clinton, a close look at the actual performance of the stock market shows that, if anything, the market benefited from, shall we say, benign neglect.

The late 1990s were the most vibrant stock market we have ever had. As we saw in Chapter 9, not only did the market go up in great back-to-back-to-back annual rallies, but the price of gold fell by almost 30 percent, making travel and foreign goods tremendously affordable. We were rich, and we thought we knew it and we loved it. The tech boom was at its peak, and a new age was upon us. From a policy point of view, a Republican Congress had in 1996 forced the president to reluctantly adopt welfare reform, and the budget was, as scored by the Congressional Budget Office (CBO), mostly in balance. It is worth noting that we were still expanding our internal borrowings—during the course of the Clinton presidency, an additional $1.6 trillion in debt was added to the outstanding $4.0 trillion at the end of the presidency of George H. W. Bush, but the total debt of the United States was relatively constant as a percentage of the gross domestic product (GDP).

In 1997, the Taxpayer Relief Act of 1997 was ...