Bruce Bartlett
With well more than 50 percent of Americans having investments in the stock market, the question of how the election will impact on stocks is the key issue for many voters. Undecided voters might well take a close look at their portfolios if they are searching for reasons to support either Al Gore or George W. Bush. In a recent report, analyst Stuart J. Sweet of Capitol Analysts Network looked at 22 different industries and how a likely Bush or Gore administration might affect their profitability. Overall, his estimate is that more industries will benefit from a Bush than a Gore presidency. Sweet sees Bush as bullish for 12 industries, bearish for 5 and neutral for 5. By contrast, he is bearish for 10 industries under a Gore administration, bullish for 7 and neutral for 5. There are two industries where Sweet sees no significant difference between a Bush or a Gore administration. First is high-tech, where both candidates will continue generally favorable policies. The exception is Microsoft, where he sees Bush and Gore as continuing the antitrust lawsuit. Other analysts, however, are more bullish on Microsoft under Bush, believing he will settle on better terms and scale-back the Clinton administration's aggressive antitrust enforcement. This means that Microsoft competitors like Sun Microsystems will tend to do better under Gore than Bush. Defense contractors are also expected to do better under both Bush and Gore. There is a general consensus that spending needs to rise in coming years to make up for the defense rundown that has occurred under Clinton. Bush is likely to spend more than Gore, however. He probably will also put more money into weaponry, while Gore may put more into pay and benefits for soldiers. Among businesses that may benefit from Bush are Boeing, Raytheon, General Dynamics and Lockheed-Martin. Among industries that would be bullish under Bush and bearish under Gore are several in the news lately. At the top of this list is oil and gas. Bush will likely press for more oil drilling domestically, whereas Gore will try to lock up even more land from development and may impose price controls on gasoline if oil prices remain high. Similarly, Bush is likely to be more accommodating to the logging and paper industries, while Gore will probably cut back on logging on federal land even if it leads to higher building costs. The property and casualty insurance industry is another that may benefit from a Bush administration and suffer under Gore. The former may scale back on expensive Superfund claims, while the latter would continue the Clinton administration policies. Conversely, companies involved in environmental cleanup would benefit from Gore but not from Bush. In the financial area, Sweet sees credit card companies benefiting from bankruptcy reform under Bush, but not from Gore. Similarly, he sees private mortgage lenders gaining under Bush, who may scale back lending by "Fannie Mae" and "Freddie Mac," two government agencies that compete with private lenders for mortgage business. On the other hand, "Sallie Mae," a government agency that deals in student loans, may benefit more from Bush, because he will likely scale-back the direct educational lending program establish by Bill Clinton and allow private lenders to expand in this area. Obviously, the pharmaceutical and tobacco industries will be impacted very differently under Bush and Gore. They will likely suffer under Gore, who will press for price controls on drugs and continue law suits against the cigarette companies. Bush would probably oppose price controls and drop or settle tobacco suits. Winners under Bush, therefore, would be drug companies like Pfizer, Bristol-Myers and Eli Lilly, and tobacco companies Philip Morris and R.J. Reynolds. These would all be losers under Gore. Another industry where the election results could make an important difference is asset management. Bush is expected to press for private Social Security accounts, so that younger workers can invest for their own retirement rather than being totally dependent on the government. Such accounts would be modeled after the popular 401(k) plan. This means that companies like T. Rowe Price and Stillwell Financial that are very active in helping workers manage their 401(k) plans might benefit from Bush, while not from Gore, who will simply maintain the status quo. Of course any analysis of how various investments might gain or lose from the election results is vitally dependent on the general economic outlook. That is probably more a function of Federal Reserve Chairman Alan Greenspan's health than anything else. But there are growing signs of an economic slowdown that could erupt into a recession next year. Should that occur, voters should ask themselves whether a tax cut such as Bush has proposed would be better economic medicine than the big government jobs program that Gore would likely favor. Any investment analysis will be critically affected by the makeup of Congress. A Gore administration with continued Republican control of the House and Senate will be quite different than one in which Democrats retake control of the House -- almost all political observers expect Republicans to keep the Senate even if Gore wins. By the same token, if Bush gets continued Republican control of both houses of Congress, he will have opportunities to enact his program that may not exist if Democrats retake the House. Whatever the outcome, it seems certain that the investment climate is going to change next year. It may get better or it may get worse depending on the composition of one's portfolio. But investors should not delude themselves into thinking that the election results will not matter. They will.

Bruce Bartlett

Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.

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