What effect will the attempted assassination of President Reagan have on the market? Will Congress react to the public "sympathy" by furthering the administration's conservative economic cause?
Wall Street is still trying evaluate the answer to these and other questions raised by the shooting. In an initial assessment, however, Bob Nurock of Butcher & Singer Inc., a Philadelphia-based brokerage house, says that ". . . should political leaders in Congress react to the President and his program on a more personal rather than a political level, we believe this would enhance the prospects for passage of the proposals under consideration." Over the intermediate term, Mr. Nurock says, this could help turn investor expectations more positive.
Frank Mastrapasqua, chief economist for Smith Barney, Harris Upham & CO., says he thinks the shooting incident will be at worst "neutral" for Wall Street and possibly positive. He reasons that "it will positive in the context that the President will be a bit more successful at getting his proposals through Congress. . . .There could be a feeling of rallying around the President. . . . It will be difficult to attack him."
Despite the assassination attempt, Julie Sedkey, an analyst with the Washington Analysis Group, a division of Bache Halsey Stuart Shields Inc., says she doesn't believe it will have any effect on the President's proposals. "No nitty-gritty decisions on the budget cuts will be made for another couple of months," Ms. Sedkey says, "and Congress won't get down to a line-by-line change in the program until June." By the end of April, when Congress is expected to complete its "budget reconciliation," she expects that the President will be back in the White House, so it won't be possible for a call from a hospital bed to a congressman to be effective.
Even so, Ms. Sedkey says one aspect of the shooting has been to increase the President's standings in the polls. "Congress is always leery of bucking a president with a high public opinion standing," she says, "so if he can keep that support, that fact alone puts pressure on Congress."
None of the analysts expect Mr. Reagan to get his three-year tax cut. Instead, they believe he is likely to only get a one-year cut. Ms. Sedkey notes that "there is a less than 10 percent chance he will get a three-year cut." This is a huge commitment for Congress to make, she believes, since it would not get much political mileage out of it for the next three years. "They would have nothing to brag about for the 1982 elections," she comments.
Congress is also concerned that if the Kemp-Roth plan doesn't work, it will get the blame. So the Bache analyst expects Congress to stick to one-year tax cuts, ones that will benefit business as well as investment and savings.