There has been some interesting criticism of the “Unthinkable” blog last week.  It was NOT a call for the impeachment of President Trump.  Quite the contrary, I stated impeachment was indeed bad for the country.  But, I predicted it would happen nonetheless, reflecting the poisonous partisanship, the massive egos in Washington, and the lack of a clear definition of “High Crimes.”  My objective was to start thinking about the unthinkable from an investment standpoint..

First, how much time do we have?  Impeachment cannot happen before 2018, when the opposition party historically gains seats during mid-term elections, and that’s in a normal year.  If the Democrats gain significantly during that election, they will likely be motivated to file charges of impeachment early the following year, but it will be late in 2019 before any impeachment trial could begin in the Senate.  By that point, I expect the stock market would already be recovering.

Second, vast armies of investment advisors, including Warren Buffett, argue the time to be 100% out of stocks is . . . never!  It is more important to shade or shift allocation between asset classes.  While an impeachment would likely reduce stock values worldwide, the damage would be greater in the U.S.  This would make international stocks more attractive on a relative basis.

Currently, international stocks are trading about 10% below their 2014 highs and 20% below their 2007 highs.  Corporate earnings have been rising nicely in the U.S. since Q3 of last year but rising even better abroad.  It is time to start increasing international exposure, to get some assets away from the risk of impeachment.