Wall Street Wonders About Bill Clinton
BILL CLINTON is getting more support, financial and political, from Wall Street than any Democratic presidential candidate since Jimmy Carter.
Sam Nakagama, a relatively liberal Wall Street economist, says the Democratic backing is "about normal for after a lousy Republican administration." That's a slam at both Gerald Ford and George Bush.
Joseph Carson, chief economist for Dean Witter Reynolds Inc., says Mr. Clinton "is attracting more attention because current programs are nonprograms." He charges President Bush with not trying hard enough to get programs dealing with the weak domestic economy through Congress.
Another Wall Street analyst, Hildegard Zagorski, of Prudential Securities Inc., says: "Wall Street has just resigned itself to the fact that Clinton is likely to win this election."
Of course, the political sympathies of Wall Street are not uniform. Mr. Carson divides his contacts into three groups: Those who don't know what to believe politically; those who figure the economy will eventually recover nicely under a continued Bush administration; and those who believe the economy needs some stimulus and that Clinton will provide it.
Wall Street was paved with gold in the recovery years of the 1980s. Then the financial community was hit by the 1987 crash and now the 1990-91 recession. This year, although some sectors of Wall Street have been doing well, there is considerable unease about the current status of the economy. That hurts Bush.
Nakagama predicts a flat economy through the remainder of this year and adds, "Next year could be worse than this year." He blames monetary policy.
"Fear and uncertainty is driving the economy right now," warns Carson. The currency crisis and slow economy in Europe, the pre-election excitement in the United States, have combined to "paralyze business," he says. Since about mid-September, railroad car loadings have dropped, commodity prices declined, and purchasing managers have been canceling some orders. "It is going to be tough," he says.
Carson sees considerable difference between the economic approach of the two candidates. Clinton, he says, is more pro-growth, pro-investment. He would spend more on education, roads, bridges, ports, sewers, and waterways, and use the government to make American firms more competitive. Bush, holds Carson, would put more emphasis on helping private business expand with cuts in the capital gains tax and a reduction in trade barriers, trying to keep government out of the decisionmaking process of the privat e sector.
But a colleague of Carson at Dean Witter says that historically it hasn't mattered much to the economy and the stock market whether a Democrat or a Republican occupies the White House. In the post-World War II years, notes Jack Vander Vliet, the frequency of recessions has been one every 5.3 years under Democratic presidents and one every 4.7 years under Republicans.
"Politicians do not cause recessions," he holds. "Rather, they are usually the unavoidable residue of a free enterprise, capitalistic, market driven system."
As for the stock market, prices have registered a compound 14 percent annual return (as measured by the Standard & Poor's 500 Stock Index) during Democratic administrations and only a 11.5 percent annual return during Republican administrations. But if an extraordinary jump in prices (23 percent annual rate) under Truman is excluded, the average market growth is 11.2 percent for the Democrats versus 11.8 percent for Republicans.
"Surprisingly," writes Mr. Vander Vliet, "the market's upward course wasn't materially different under the perceived `different' administrations and `leadership' capabilities of Eisenhower, Kennedy, Carter, Reagan, or Bush ... In terms of the market and the economy, we've been `one party' for almost 50 years."
Whether that's so or not, a lot of well-paid Wall Street analysts have been busy examining the possible impact of a Clinton win. Donaldson, Lufkin & Jenrette has a 118-page booklet on the "investment implications of a potential move to the left." Prudential Securities speculates on the nature of a fiscal stimulus package by a Clinton administration. As stock market price bounces this week show, Wall Street remains edgy about the future.