Political controversy might not be at the forefront of investors' concerns in developed markets, but large-scale political events still create levels of uncertainty that most hope to avoid. The economy under President Richard Nixon faced high inflation and unemployment as well as the 1973 oil crisis, while under President Bill Clinton the economy thrived during the heart of the dot-com bubble.
Crises and equities: Equities performed poorly with high volatility in the years surrounding Nixon's Watergate crisis, 1973-'74. The market during and after Clinton's impeachment proceedings in 1998 hit record highs.
Equities and volatility: As 2017-'18 has shown, equities fall with higher volatility, which is affected by changes in governmental policies. Recent examples include trade disputes and the GOP tax law.
T-note skyrockets: The 10-year Treasury yield swung 214 basis points in the years around Clinton's impeachment, and rose to about 6.3%. While rates rose less during Nixon's years, they were already near historic highs.
Dollar losses: The U.S. dollar fell against major curr- encies during both periods, despite rising interest rates. The Nixon era experienced high inflation, while Clinton's years saw the yen affected by the Asian financial crisis.
*Volatility as measured as the 90-day standard deviation of the S&P 500 index. Source: Bloomberg LP