What the Starr Report can Teach Investors about the Mueller Report

The Starr Report was the Mueller Report of its time: a much-awaited investigative report that revealed the sordid details of a president’s behavior and his circle. This report, released to the public on September 11, 1998, led to the impeachment trial of President Clinton. He was acquitted in 1999.

The purpose of this note is not to review that history, but to observe that the release of the Starr report was clarifying. The release of the report and the impeachment proceedings that followed had no impact on financial market performance. In fact, stocks rallied about 50% from the date of the report’s 1998 release to the end of the bull market in 2000. What mattered was the economy, earnings, and Fed policy. And the Fed? It began to ease policy in the second half of 1998 in response to turmoil in EM economies and markets. This was the exclamation point on the bull market of the 1990’s and turbocharged that bull run to its finish. The Fed has yet to ease in 2019, but it has adopted a more dovish posture, the rate hikes are on hold, and balance sheet reductions are likely at the finish line – all signs of greater accommodation. As the famous line goes, history does not always repeat itself, but it sure does rhyme.

If past is prologue, we believe the Starr Report story tells us to embrace the certainty that the release of the Mueller Report will provide markets, and to let future earnings and monetary policy take care of the rest.

S&P 500

Source: Bloomberg, accessed 2/25/19

Jonathan E. Lewis
Chief Investment Officer

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