"Tail risk is the additional risk of an asset or portfolio of assets moving more than three standard deviations from its current price, above the risk of a normal distribution."
To the lay non-statistician this means an unlikely risk, but a risk nonetheless.
Does that sound like something that rhymes with en-reach-ment?
In client correspondence, we've recently mentioned a few other tail risks that could affect markets - Brexit No-deal, Iran/oil price spike, etc.etc. It really does feel like these are risk-filled times.
Markets tanked -33% the year after Nixon's impeachment inquiry/resignation and they rallied 39% the year following Clinton's impeachment inquiry/Senate acquittal.
In late 1973/early-1974 the economy was already weak and in recession. And in 1998 the economy was gaining strength and ripe for a rebound. In both cases impeachment almost certainly didn't play a role in market directionality.
Based on history impeachment is probably not a risk to the stock market - unless quid pro quo a socialist becomes president.
Is this an impossibility or just very unlikely?
Weekly Markets Update, Week ending October 18, 2019
Last week the S&P 500 was up 55bps even as the Dow Jones lost -13bps, the Russell 2000 added 1.57% and the Nasdaq added 40bps.
As for US bonds, they added 10bps.
Globally, the MSCI World Index increased 74bbps and the Barclays Global Aggregate Bond Index added 30bps.
In September, the Euro Stoxx 50 added 27bps in local-currency (Euro) and 1.24% in USD. Meanwhile, the Topix added 1.67% in local-currency (Yen) and 1.66% in USD.
