Your Investments and Election 2000
- Monday, November 06, 2000
If Gov. George W. Bush should become president-elect today, do you know what stocks to buy? If Vice President Al Gore is elected, do you know what to sell? What will the reaction be in the bond market? Does anyone care about a single party running the White House and Congress?
These are important questions for investors. Market perception of candidates, their policies and their agendas could affect your holdings. Whether you are a day trader or own mutual funds in your 401(k) plan, you might want to understand how the market could react to either candidate.
For purposes of this article we will assume that Ralph Nader and Pat Buchanan will be doing something other than inviting friends to the White House over the next four years.
Stocks to Own for President Bush II
A historically Republican-backed sector such as the defense industry will benefit from increased military spending and new contracts. Parts suppliers should be especially good as the United States modernizes much of its existing equipment.
A move to cap lawsuits against HMO's should bolster the growth prospects of the industry. Pharmaceuticals will also experience less government interference under President Bush II.
A broad tax cut would bolster spending and produce a "wealth-effect" which has the tendency to increase discretionary spending. High-end retailers, airlines, and cruise lines could benefit from consumer spending.
Stocks to Own for President Gore
With a propensity to expand government, companies with government contracts will enjoy the Democratic retention in the White House. In addition, Fannie Mae (FNM) should remain a government agency. FNM has suffered from the possibility that it might lose its agency status, which would adversely affect business.
Environmental stocks will benefit from increased reform and new laws designed to protect the earth.
Stocks to Sell After The Election
If Bush wins, Fannie Mae might lose its government agency status. Should Gore win, drug companies, HMO's, oil companies and defense contractors could have a tough four years.
Overall Market Outlook
Control of the White House and Congress by a single party would be viewed as too much control and could amplify the stocks to buy or sell as discussed above. A split White House and Congress would be seen as keeping change at bay. The stock market does not like change.
Al Gore is perceived to be better for the bond market. A tax cut would significantly reduce the budget surplus and cause further debt supply.
George W. Bush is perceived to be better for the stock market as lower taxes could increase spending and bolster earnings for many companies.
In the end, the financial markets would prefer a split decision on Election Day 2000 with partisan politics to resume their traditional "check and balance dance."
Crosswalk.com does not make recommendations to buy or sell securities. This content is intended to be informational only. We recommend that readers make investment decisions after completing their own research of stocks and bonds.
Election Day commentary from Randy Tate, Armstrong Williams and Michael Medved - right here at Crosswalk.com. Visit the Election Day page for all the details.
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