To a person, investment strategists interviewed believe if the scandal-scarred president quits it would give the market a quick one-two punch, while drawn-out impeachment proceedings would be more like a knockout, creating months of uncertainty at a time when U.S. leadership is needed to help resolve global economic problems.
Wall Street's thinking doesn't wash with some legal scholars, who argue that impeachment is built into the Constitution as a lawful remedy to the problem of miscreant leaders. A resignation, in contrast, would appear to be a victory of media pressure over the system - hardly a long-term stabilizing trend.
"One is a process laid out by the Constitution," says Thomas Morrison, assistant dean of George Washington University Law School in Washington. "The second is a walking away, an avoidance of a constitutional issue. It's not having it fully talked about, fully adjudicated."
It may not bother academics that impeachment is a lengthy process, but Wall Street isn't a patient lot.
"It's a cliche to say the markets don't like uncertainty, but it's also true," says Greg Valliere, chief political analyst for
Charles Schwab Corp.'s Washington Research Group. "The worst possible scenario for the market is no speedy resolution. That also seems the most likely scenario."
Resignation or impeachment are hardly the only possibilities.
Says Robert Kavesh, economics professor at New York University: "My guess is that there will be some kind of formal censure, and life will go on and the stock market will react to things like what's happening in Russia, whether the Japanese are wising up, interest rates - the laundry list of real economic and financial problems."
Bill Meehan, chief market analyst at New York broker Cantor Fitzgerald, agrees that the president's troubles pale in comparison to the world economic crisis and excessive valuations of large capitalization stocks. "This is just kind of like somebody who has just broken their leg and also has a pebble in their shoe."
Nevertheless, the president's ups and downs related to the Monica Lewinsky affair have clearly been reflected in recent market moves.
Dollar devaluations
Peter Canelo, U.S. investment strategist for Morgan Stanley Dean Witter & Co. in New York, has traced the impact of the release of special prosecutor Kenneth Starr's report and Clinton's unapologetic apology speech in August, both of which led to quick dollar devaluations.
"Every major drop in the dollar coincided immediately or shortly thereafter with a major drop in the U.S. stock market," Mr. Canelo says, "leading to the obvious conclusion that since foreigners have been big buyers of our stock market, they have been an important agent in the selling. That's why the stock market moves have been so extreme: There's been panic selling from abroad."
But Mark Stumpp, senior managing director of Prudential Securities in Short Hills, N.J., says his historical research shows "absolutely no relationship between presidential scandals and stock price movements." The only exception is President Nixon's resignation in 1974, but the 25% loss in equity values was regained within months, he notes.
And that was when the U.S. economy was in a much weaker state. "We were in the worst
bear market (in history) in 1974. The economy was a disaster, inflation was a disaster," says Mary Farrell, senior investment strategist at Paine Webber Group in New York.
Still, "the market works very different now than it did 25 years ago," observes Lawrence Kreicher, chief economist at Alliance Capital Management in New York. Today the news media and investors are "constantly digesting and focusing on events in Washington. We're more sensitive to it."
A resignation would lead to an initial flight to bonds and other fixed income products, predicts Barry Evans, investment strategist for John Hancock Funds in Boston, but such a phase would be short-lived.
However if President Clinton were to hang onto office, it might introduce a whole new set of risks, says Schwab's Mr. Valliere: "Clinton would be more inclined to grasp at straws from a policy standpoint. Maybe he would flirt with a government shutdown if he and Congress haven't agreed on a budget. Maybe he'd consider spending some of the budget surplus on a tax cut. Maybe he would consider suing the tobacco companies."
Worse, he'd feel beholden to Democrats. "They're generally more liberal than he is," says Mr. Valliere. "Perhaps he would have to acquiesce to their legislative demands, whether it's the minimum wage or (being) a little more protectionist."
Market players are also worried about the Clinton deputies who've been calling the shots on the economy:
Federal Reserve Board Chairman Alan Greenspan and Treasury Secretary Robert Rubin.
Until this summer, "Wall Street had become comfortable with the idea that the president was in some jeopardy but the direct line of authority for dealing with the financial crisis was in the hands of a couple of very competent field generals," says Charles Gabriel, senior Washington analyst for Prudential Securities.
But the mood has changed. "He is seriously damaged goods. The bigger risk now is in Clinton staying rather than leaving."
