Bush’s Condition Will Have Little Effect on Health of World Markets, Experts Say
President Bush’s sudden hospitalization for an irregular heartbeat is expected to create only a minor stir on the world’s financial markets when they reopen this morning, leading economists and market analysts said Sunday.
Stocks may open lower in the morning, and the U.S. dollar may show some initial weakness on the international currency markets, but analysts said that they doubt Bush’s hospital stay will have any long-term economic effect unless it becomes clear that his medical condition is worsening.
“I think there are going to be some ripples of anxiety on this, but I’m not expecting any major reaction,” said Lawrence Kudlow, senior managing director and chief economist at Bear, Stearns & Co. in New York.
“I don’t think this is going to be anything like it was in 1981 when President (Ronald) Reagan was shot,” Kudlow added in an interview on Cable News Network’s “Newsmaker Sunday.”
President Bush’s chief economic adviser, Michael J. Boskin, also stressed that he does not believe there will be any significant fallout from the President’s illness.
“I think the President is in very good health overall,” Boskin said on the CBS interview program “Face the Nation.” “I think you’ll see him most likely back to a full schedule pretty quickly, and I think it won’t really have much of an impact at all on the economy.”
In the past, the financial markets have turned volatile after a presidential illness, especially in cases when a President has faced a prolonged hospital stay. “We had very, very volatile swings in the stock market in the immediate aftermath of that (Reagan) shooting,” recalled Kudlow, who was a senior official at the Office of Management and Budget in the Reagan Administration.
“We saw it in the ‘50s with (Dwight D.) Eisenhower, we saw it with (John F.) Kennedy and we saw it with Reagan,” said Jack Solomon, a market analyst at Bear, Stearns & Co..
“The markets tend to be skittish when it comes to things of this sort,” added Hugh Johnson, chief investment officer at First Albany Co.
And word of heart ailments has often sparked a sharp selloff on Wall Street. President Eisenhower’s series of heart attacks led to losses in the markets in the 1950s. Much like today, there was concern over the prospect of a transfer of power to the vice president.
Even false rumors of heart problems can have a powerful impact on the markets. For example, a rumor that Reagan had suffered a heart attack sent the markets reeling for a few hours until it became clear that Reagan was not ill.
Some analysts noted, however, that Wall Street was expected to show some unusual volatility today even before President Bush went to the hospital. For the first trading day, three stocks--Walt Disney Co., J.P. Morgan & Co., and Caterpillar Inc., will become part of the group of 30 blue chip stocks that make up the Dow Jones industrial average, replacing three other firms that are less representative of the economy. As a result, the widely watched Dow Jones average may take some unusual swings.
In addition, analysts cautioned that the global currency markets may also show some wide swings because the huge Japanese markets will be closed for a holiday, placing extra pressures on smaller markets elsewhere.
