Clinton Surge May Actually Boost Stocks
Bill Clinton’s mere ascendance in the presidential polls will be enough to sink the stock market between now and November, right? And if he actually wins--well, Katie bar the door, trade your stocks for canned goods and shotguns.
That’s the attitude of a lot of Wall Street analysts, who are certain that investors can’t stomach the idea of a Democratic President.
But a surprise may be brewing: The ranks of big money managers--most of whom are lifelong Republicans--may already contain a substantial Clinton cheering section. Rather than react badly to a potential Clinton victory, these investors may in fact become heavy buyers of stocks this fall on budding optimism about Clinton’s economic plan.
If this sounds far-fetched, consider the following evidence that George Bush has lost the traditional Republican stranglehold on Wall Street:
* At a conference of public pension fund managers in Helena, Mont., two weeks ago, the 150 participants--who came from all over the United States--were polled by secret ballot on their presidential choice. The results: Clinton and Ross Perot tied at 49 votes each. Bush got 45 votes. And if national polls since Perot withdrew are any guide, most of his supporters at the Montana conference may have gone over to Clinton.
“I was real surprised,” admits David Lewis, director of Montana’s $4.5-billion Board of Investments. The pension managers’ vote was particularly interesting given that Clinton has suggested that he would virtually demand that the funds commit a chunk of their portfolios to a new “rebuild America’s infrastructure” program--whether the funds want to participate or not.
* David Booth, whose Santa Monica-based Dimensional Fund Advisors is one of the country’s biggest investors in small stocks, says he won’t be voting Republican this year, for the first time ever. Disgusted with Bush, Booth says his attitude toward Clinton today is, “Why not give him a chance--things can’t be any worse.”
* At Gramercy Capital Management in New York, President Joan Lappin--a Ronald Reagan booster all during the 1980s--now calls Bush and the Republican Party “bankrupt of ideas,” and says she will unquestionably vote for Clinton this fall.
These anecdotes don’t prove anything, of course. But they suggest that the desire for sweeping change in America isn’t limited to the few thousand people who crowded Madison Square Garden’s floor at the Democratic National Convention. A growing number of powerful people whose actions determine the course of the stock market also appear enthused by Clinton’s game plan for the nation.
Most significant is that many normally Republican money managers no longer see the Democrats as a party totally lacking in fiscal responsibility. “I think (Clinton) represents a departure from previous Democratic policies,” says DeWitt Bowman, chief investment officer of the giant California Public Employees Retirement System fund. “It seems to be an enlightened approach.”
And while major questions remain about how Clinton would fund his ambitious plan to remake the economy, many big investors are impressed simply by the plan’s breadth and its focus on revitalizing the nation’s education system, boosting worker training and pushing infrastructure investment. All of those things strike Clinton supporters on Wall Street as key to rekindling a sense of hope about the economy.
Indeed, if you assume that what the stock market wants most is to finally see the economy embark on a sustained recovery, it’s easy to believe that stock prices could rally sharply this fall if Clinton keeps his lead in the polls, and if more investors begin to view his economic plan as the best tonic for what ails the nation.
It’s true that there’s a lot of highway between now and Election Day, and Bush may yet present new ideas that will recapture straying Republicans. But more than a few money managers appear to be treating Bush with the same contempt that they reserved for Jimmy Carter in 1980: No matter what Bush says, some people have stopped listening.
“When people go to the polls, they’ll remember how Bush cut back on his no-new-taxes pledge,” says Booth. “He lied and reneged.”
Meanwhile, Lappin argues that, even though Clinton supports new taxes on the very wealthy, Wall Street is beginning to understand the necessity of funding targeted programs that could enfranchise the nation’s poor.
“I should not be walking home by all of these homeless people,” she says. “Something is wrong. We should not be a country this rich (while) all of these people are out on the street.”
There are, of course, still many big investors who abhor the idea of higher taxes. For that reason, Richard Carney, principal at the Los Angeles investment firm of Cramblit & Carney, says Clinton’s platform “isn’t likely to sound better to me than the Republicans’ ” by November. “I still vote Republican politics,” he says.
Yet Carney too admits that he has “a lot more respect for the middle-of-the-road aspect of the Democrats now.” While Bush is his choice as of today, “there might be a time when change is necessary,” he says.
A Clinton Portfolio? Here’s how Thomas Gallagher, a political analyst for brokerage Shearson Lehman Bros., tallies financial markets’ potential winners under Bill Clinton’s ambitious economic plan:
* Rebuild America Fund: Clinton would create a $20-billion federal fund to launch major infrastructure improvement projects. Potential beneficiaries include many road and bridge builders, including Kasler Corp., Granite Construction, G. F. Atkinson and Morrison Knudsen, and steel firms such as Oregon Steel, Birmingham Steel and Nucor.
* Health care reform: Clinton favors national spending “caps” on health care that would encourage greater use of managed-care networks, such as health-maintenance organizations. Potential winners would be United Healthcare and U.S. Healthcare, two of the nation’s biggest HMOs.
* Education/training: By requiring all companies to spend at least 1.5% of their payroll on worker training, Clinton could boost firms that supply training services, such as National Education Corp.
* Higher taxes on wealthy: Clinton’s proposal to raise the top tax rate to 36% from 31% for people earning more than $200,000 a year would probably drive many of those individuals to buy more tax-exempt municipal bonds, thereby boosting muni bond values.
All stocks mentioned trade on NYSE except Granite, Atkinson and U.S. Healthcare (NASDAQ).
Source: Shearson Lehman Bros.
