In Monday’s missive I wrote:

Our work suggests there is still a chance for the S&P 500 (SPX/2992.07) to trade out to new all-time highs (ATHs). However, the first part of October is showing up as problematic on a trading basis and potentially before then.

Well, “potentially before then” began yesterday with the revelation that Speaker Nancy Pelosi was proceeding with a formal impeachment inquiry against President Trump. Here’s what we think we know: It is our understanding that initially the president, in a tweet, said he would release the controversial Ukraine transcript without checking with counsel or anyone else (????). Later it was reported that he subsequently sought counsel. We believe the Ukrainian government has said there was no quid pro quo involved. We will find that out today with the transcript. It is rumored the “Ukraine Leaker” has much more “dirt” on the president. Nancy Pelosi was losing control of the House Democrats and finally caved to the cries for impeachment. Adding to the consternation was Brexit. As a sidebar, those of you that know me know that I spent years inside the D.C. beltway and still have pretty good contacts there. As it was explained to me last night, according to the U.S. Constitution the House has the sole power to impeach. However, individual House members must introduce impeachment resolutions like ordinary bills, or by vote passing a resolution authorizing an inquiry. That has not happened yet. As Representative Doug Collins notes, “Speaker Pelosi’s decree changes absolutely nothing. As I have been telling Chairman Nadler for weeks, merely claiming the House is conducting an impeachment inquiry doesn’t make it so. Until the full House votes to authorize an inquiry, nobody is conducting a formal inquiry.” Importantly, impeachment is a political, not criminal, event and we doubt President Trump will be impeached and forced to resign (a tip of the hat to the Sevens Report).

As for the stock market, as we said, “The first part of October is showing up as problematic on a trading basis and potentially before then.” Obviously, when we wrote that we had no idea of the impeachment inquiry bombshell. That said, news events typically only have a short-term impact on the primary trend of the stock market; and in this case the primary trend is UP. For example, following the Clinton impeachment (10-8-1998) the stock market was up over 30% a year later. The Nixon impeachment was another story as the D-J Industrials fell some 30% from 2-1974 into the bear market low in 12-1974, but back then the equity markets had already been in a bear market since January 1973. Further, the prime rate was at 11%, car sales were down 34%, Franklin National Bank declared bankruptcy, and Nixon resigned. More recently, we have gotten several questions about why we have not made any investment recommendations over the past few weeks. To that we reply – we only make recommendations when we think the odds of success are high – we have not felt that way for the past few weeks.