The Failed Presidency.

History shows market is due for a campaign rally

By Roy Bragg
Express-News Business Writer

Web Posted : 10/04/2003 12:00 AM

Like birds migrating south for the winter or animals stampeding before an earthquake, the stock market has an innate sense of danger and survival.

From riots in Malta to mobile home purchases in Mobile, thousands of financial decisions and geopolitical events can impact the market's performance.

But in the grand scheme of all things financial, nothing makes the market run for the hills like an American presidential campaign, a time of planned upheaval that affects the entire world.

Fiscal policies of every nation can live or die based on U.S. presidential campaign speculation. Voter polls here influence political decisions made in world capitals. Foreign markets can rise, fall or tread water based on what happens on Election Day.

In "The Presidential Election Cycle," a report written over the summer for investors, Vincent Collicchio of San Antonio-based investment firm U.S. Global Investors lays out his historical template for presidential terms.

It goes something like this: Two bad years, followed by one good year, followed by one great year.

"The correlation is overwhelming," said Christopher Holoman, a political scientist at Hilbert College in Hamburg, N.Y. "It's held up for 70 years. The first two years, the economy is down. The third year, they start taking steps to improve things and it gets better. By the fourth year, it's always up.

"Now we've gotten to the point where it's almost a self-fulfilling prophecy," he said. "Investors expect it to happen, so it does."

And it's been no different during George W. Bush's administration. After two years of a semi-conscious post-recession economic recovery, financial forces are gathering speed.

The Federal Reserve Board has lowered rates to all-time lows. The Bush administration and Republicans controlling Congress are keen on priming the economy. Hence a commitment to deficit spending and tax cuts this year. Joblessness, he said, is a lagging indicator, meaning that it rises six months after other indicators rise. If that timing holds true, people will be going back to work and jobless figures will be plummeting as Bush begins his campaign in earnest.

And if the situation in Iraq is under control by the middle of next year, Bush will be sitting pretty, with a healthy economy, a quiet Iraq and a Democratic field of candidates beating each other senseless on the sidelines. The outlook for investors, Collicchio believes, is good.

"It's a good time to dive in," he said. With the dollar weak, investors should target companies that sell goods overseas, because a weak dollar makes them more competitive with foreign manufacturers.

That also will follow the pattern, Holoman said.

"There's always a natural enthusiasm that builds up around presidential campaigns," he said. "People on both sides are promising change, and that makes investors feel good about stuff."

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10/03/2003

DECEMBER 17, 2001

WASHINGTON OUTLOOK



A Bush Recession? For the Dems, the Right Weapon at the Wrong Time

It's a hard time to be a hard-charging Democrat. After all, the man derided by Dems as a Presidential pretender just a year ago now wins near-unanimous support for his response to the September 11 attacks. So with the 2002 election season about to start, what's an opposition party to do? How about: change the subject.

Convinced that the floundering economy could eventually become the Republican Party's Achilles' heel, Democratic leaders have been refocusing public attention on Bush's fiscal stewardship and GOP favors for corporate interests. In recent weeks, Senate Majority Leader Tom Daschle (D-S.D.) has delayed action on an economic stimulus plan to give Dems time to blast the hefty business tax breaks and modest worker assistance backed by Republicans. Democratic Congressional Campaign Committee Chair Nita M. Lowey (D-N.Y.) raised the rhetoric several decibels higher on Nov. 29, blaming Bush for the recession and labeling his refusal to spend more on homeland security "unpatriotic."

But their blunt approach carries significant risks as Democrats seek to retain control of the Senate and regain the House. Strategically, their timing is problematic on two levels: With the election 11 months away, it's the public mood next fall--not this holiday season--that matters. Moreover, signs of recovery in some sectors could take the punch out of the Dems' message.

"This is not a debate we want to have right now," warns one high-ranking Democratic operative. "If we get involved in a fight with a popular President, we can only lose." Not only is the strategy suspect, but the Dems' tactics--such as questioning the President's patriotism in the middle of a war--have been downright suicidal. The shrillness of the attack goes against the advice of top strategists like hyperpartisan James Carville, who warned in a Nov. 13 memo that Democrats need to support Bush's wartime efforts and "set a tone that lacks a sharp partisan quality."

Now, Republicans have been able to muster their righteous indignation and change the subject once again--from the economy to Democratic tactics. National Republican Campaign Committee Chairman Thomas M. Davis III (R-Va.) called Lowey's remarks "shameful" and accused her of trying to "undermine our national unity." With Democrats attempting to regroup, a more conciliatory Daschle on Nov. 27 backed off on demands for an additional $15 billion in homeland security spending. Meanwhile, the DCCC has abandoned a plan to use Bush's name in negative ads and has scaled back a media blitz. Lowey was unavailable for an interview, but DCCC board member Robert T. Matsui (D-Calif.) says his party has an obligation to highlight Republican economic priorities. "The public supports the President and supports bipartisanship," Matsui says, "but people are concerned enough about the economy that they want us to talk about it."

TAX MATTERS. Blunders aside, the economy still could be the top Democratic weapon in 2002. Several recent polls show a growing concern about the recession, particularly among swing voters and independents. And Americans are more receptive to Democratic stimulus proposals--such as increased aid for the unemployed, massive government spending for construction projects, and postponing tax relief for the wealthiest--than to a GOP package that tilts heavily toward business. "The importance of the economy to the 2002 elections is hard to overstate at this point," argues analyst Karl Agne of Democracy Corps, a Democratic polling and strategy group.

Maybe so. But as the Dems are learning, playing the economic blame game with a wildly popular wartime President can backfire faster than you can say "rally 'round the flag."

By Richard S. Dunham and Lorraine Woellert

http://www.businessweek.com/magazine/content/01_51/c3762094.htm