Growing signs that Donald Trump's erratic behavior could result in his being forced to exit the Oval Office, just as Richard Nixon was driven out in 1974, has investors recalling the major market correction that occurred during and after the Watergate scandal that doomed Nixon's presidency.

Reports of a memo from since-ousted FBI Director James Comey saying the president asked him to scrap an investigation into one of his top national security advisers sent shock waves on Capitol Hill and Wall Street Tuesday. This latest revelation, combined with Trump's firing of FBI Director James Comey last week and his own admission the decision was tied to the bureau's ongoing Russia investigation, has intensified comparisons to Watergate. While it's still too early to determine whether the smoke surrounding Trump truly parallels Nixon's Watergate fire, if it does, Wall Street better watch out.

Watergate refers to a 1970s political scandal following the failed break-in at the Democratic National Committee headquarters in June 1972. The event served as a catalyst of a series of revelations about Nixon's abuses of power, including wiretapping and investigations into political opponents and activist groups. It resulted in Nixon's resignation on August 9, 1974.

Trump's Comey ouster last Tuesday drew comparisons to the so-called "Saturday Night Massacre" on October 20, 1973, when Nixon fired the special prosecutor investigating the case and saw both the attorney general and deputy attorney general resign in the process.

"This is not yet Watergate," Bob Woodward, one of the journalists who covered the Watergate scandal, told Fox News' Chris Wallace on Sunday. He later added, "There is an immense amount of smoke."

Carl Bernstein, who reported on Watergate alongside Wallace, offered a more ominous take on CNN. "I think this is a potentially more dangerous situation than Watergate and we're at a very dangerous moment," he said.

The parallels between Trump and Nixon don't end at politics -- they can be seen in the markets as well.

"There are some eerie parallels between now and that time," said New York University financial historian Richard Sylla.

Much like there was a Trump rally after the real estate magnate's surprise November election, there was a Nixon rally after he was reelected.

The Dow hit 1,000 on November 14, 1972, seven days after the presidential election. The index reached 20,000 on January 25, 2017, five days after Trump's inauguration.

"There was a definite up movement there from Nixon's election into the first month of 1973," Sylla said.

From there, the Dow began to drift back down, ending the year at about 851. To be sure, it wasn't just the unfolding Watergate scandal that contributed to the market's decline but also the 1973 oil crisis and a decision by OPEC to halt U.S. oil exports, causing gas prices to soar.

From about February 1973 to the end of the year, the Dow had lost about 15% of its value. And the worst of it didn't come until the following year.

The Dow slipped below 800 in July 1974 and by August, when Nixon resigned, it was below 700. The index fell below 600 by October 1974.

"The Dow ended up losing something like more than 40% of its value from the peak [from early 1973 to October 1974], which occurred right after Nixon's reelection," Sylla said. "This would qualify as a major market down-move."

Scott Lilly, senior fellow at the Center for American Progress Action Fund, pointed out recently in HuffPo that the S&P took a similar dive during that time. "Watergate was a grim period for those who ignored the old adage, 'When the president sneezes, the market catches a cold,'" he wrote.

Watergate wasn't the only event pushing markets downward in the 1970s, noted Reuters' Rob Cox recently. OPEC, Nixon's decision to end dollar-gold convertibility, and market declines in the United Kingdom and elsewhere also contributed.

"Even so, Nixon's travails mattered," he said. "Aside from uncertainty over the presidential endgame, it's arguable he and his administration were distracted and, as a result, failed to provide the caliber of leadership for Western nations that might otherwise have been possible. In turn, that probably worsened the fallout from the oil embargo and financial-market turmoil."

Markets had largely shrugged off Trump's troubles -- until now. Stocks tumbled at market open on Tuesday, and volatility spiked.

"How does it all end? Not well for Trump," said John Dean, former White House counsel to Nixon, in an interview with New York Magazine. "He's throwing every signal out that he's got a problem, and he's trying to make it go away. So that's why I say I can't imagine it ending real well for him. He's trying to bend reality to his vision of what it should be, and that's pretty hard to do."

Investors, beware.

Over on Real Money Jim Cramer give advice to investors looking at how to play the Trump Trade. Get his insights or analysis with a free trial subscription to Real Money.

Story has been updated with information on Comey memo, market reaction and comments from Lilly.

Editors' pick: Originally published May 15.

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