We do not expect financial markets to be influenced by the coming Senate impeachment trial. It appears that most market agents expect the outcome to be a repeat of history, where the two-thirds threshold of a Senate conviction vote is not reached. If it is reached, there may be some market reaction; but we think that, too, is doubtful. For market agents, this is purely a political show. For constitutional scholars, there is going to be a debate on the structure of an impeachment that is unparalleled in American history (even 1876 wasn’t this complex). The basic question is how and why impeach someone who is not holding a position? The debate may be fierce but most financial market agents see it as a waste of time.
For the rest of us, there will be many replays of the horrible scenes we witnessed in the outright attack on our nation’s capital. And now we are learning about who paid for the January 6th event. The Wall Street Journal is breaking the story Saturday morning as this commentary was going to press. And we have seen that some of the January 6 perps were modern-day veterans, including the woman who was shot and killed by US Capitol Police (“Police Identify Woman Shot by Capitol Police as Ashli Babbitt,” https://www.wsj.com/articles/police-identify-woman-shot-by-capitol-police-as-ashli-babbitt-11610055730).
For those of us who are veterans, this episode has been particularly painful. I have spoken with many who wore a uniform in the service of our country; some were colleagues from my Army time. Others were in different branches and “in the service” at other times. To a person, not one supports what they saw. Every one of them condemns the riot and the speech for inciting that riot. Every veteran I know is harshly critical of those who committed insurrection and sedition. The nation seems to agree, as Trump’s polling numbers have plummeted since the insurrection (“Last Trump Job Approval 34%; Average Is Record-Low 41%,” https://news.gallup.com/poll/328637/last-trump-job-approval-average-record-low.aspx).
In my family, military service was a tradition. Mine was in the Army, 1966–69. My father served in the Navy, in the South Pacific, 1943–45. Cousins and uncles were in the Air Force (Korea) or the Army in WW2 (Europe). Perhaps most memorable is my great uncle George H. Kotok, who died before I was born. He was the youngest of seven brothers. Another Great Uncle (Frank Kotok) that I also never met wrote this on April 15, 1930, after the death of George Kotok:
“Being unable to enlist in Boston, he [George] went to Belmar, Texas, where at the age of fifteen years he enlisted in the United States Cavalry under the assumed name of George H. Karvel. His whereabouts during this time was unknown to the members of his family as no information was received from him. The United States then being engaged in difficulty with Mexico, the regiment George was in was sent into Mexico under General Pershing. George engaged in several skirmishes along the Mexican border. After he had been in service about nine months he was thrown from his horse, and his leg was badly injured. For three months he lay in the hospital, hovering between life and death, and his indomitable will is shown by the fact that despite his illness he never apprised the members of his family of his condition. In November of 1917, one year after his enlistment, he was honorably discharged because of his injuries and returned to his home in Vineland, New Jersey.”
Here’s a quick summary of the rest of George’s story, from the Kotok family archives: George finished high school in Vineland after returning home, attended George Washington University, transferred to Harvard University, and graduated from Harvard in 1924. He traveled extensively, was known as a poet and a patriotic orator (including for the sale of war bonds). He died on October 15, 1927, of pneumonia, at age 26.
I noted how many of the Capitol rioters were in their 20s. Friends have continually commented on how such behavior would be handled in Beijing or Moscow or Caracas or Kabul or so many other places in the world. Only in the great United States did the rule of law restore order even under such extraordinary circumstances. Now, the process of investigation, compiling of evidence, arrests, and trials is unfolding in public view, while the US Senate will hear the House impeachment article and perform its constitutionally required duty for the entire world to observe.
No, dear readers, markets may not care about impeachment and the political theater; market agents care about earnings and interest rates and deficits and taxes. That’s because market agents take it as given that the rule of law is still intact in the United States. But is it? Is it fully intact, or is it fragile? Is it threatened by false narratives and social media trolls? For my friends and colleagues who have worn uniforms, I think the answer is, “We are worried.” But we aren’t giving up on America even as we have no compassion for the perpetrators who defiled our nation’s Capitol.
Rule of law affirmed while miracles of vaccine and technology and medicine and science abound before us. There is a positive story evolution under way. Let’s protect it and support it. We have work to do.
David R. Kotok
Chairman of the Board & Chief Investment Officer
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Cumberland Advisors Market Commentaries offer insights and analysis on upcoming, important economic issues that potentially impact global financial markets. Our team shares their thinking on global economic developments, market news and other factors that often influence investment opportunities and strategies.
