Impeachment won't rattle markets

Last month the House approved two articles of impeachment against Clinton, charging that he lied about his relationship with Monica Lewinsky before a grand jury and that he obstructed justice by trying to conceal his affair with the onetime White House intern. Today the Senate opened the proceedings that resulted from those charges--the first presidential impeachment trial since 1868.

Although there are many factors--such as the monetary crisis in Latin America and continuing financial problems in the Asia-Pacific region--that could put a damper on the booming U.S. economy or halt the skyrocketing success of Net stocks, economists say the fate of the presidency is not expected to have a lasting effect on consumer spending or Wall Street trading.

"The impeachment hearings at the moment are clearly an outside noise for the market that won't have a long-term impact on stock prices," said Ned Riley, chief investment officer at BancBoston.

"The issue of the economic backdrop couldn't be better for consumers, and they do feel the administration is in part responsible for that success," he added. "But investors have a tendency to ignore the political events unless they have a direct impact on the stocks."

Many technology stocks faltered today despite recently propelling the Nasdaq index to record levels. Several Wall Street analysts cut their ratings outlooks on key portal companies, such as Yahoo, Excite, and Lycos (See related story).

Riley pointed out that, in 1994, when Hillary Clinton was pushing her health care reform package, stocks in the the health sector took a serious dive amid concern that government would seek more control, such as price-fixing, over health care delivery.

But the legislation proposed by the First Lady didn't pass, and health care stocks quickly recovered, he noted.

Others say the outcome of the trial definitely will affect the market--temporarily.

"If he is found guilty, we will see a significant jolt in the stock market, but it will be short-term," said Cynthia Kroll, a regional economist at the University of California's Haas School of Business.

But Clinton's predicament has few historical comparisons, which makes it hard for economists to predict how the market will react if he is removed from office.

"Some would argue that [President Richard] Nixon's resignation had an influence over the market, but he resigned during a tumultuous economic world event--the Arab oil embargo and an emerging recession," Riley said.

Analysts said that, in a democracy, there is little reason for concern even if Clinton's removal from office does come to pass. They are confident that the government would intervene to sustain the economy if impeachment began to have a destabilizing effect.

"In a lot of countries, if the head of state was under this type of scrutiny, it could lead to a collapse in the government," UC's Kroll added. "But under our system of government, Clinton could be removed or resign and the basic structure would still be in place."