He´ll have to jump on the gas pedal hard

Low inflation. But investors
looking for more than the paltry
returns promised by money
markets and certificates of deposit
don´t have much choice. Despite Federal Reserve
Chairman Alan Greenspan's
warning earlier this summer,
signs of inflation in America
are still as elusive as a ghost. At
one point last week the yield on
the benchmark 30-year Treasury
bond slipped to 6.42 percent,
a 16-year low
That could change by next
year, however. One scenario
increasingly heard on Wall
Street is that if the U.S. unem
ployment rate doesn't start fall
ing noticeably before the next
congressional elections,Clin
ton will shift his focus from def
icit reduction to stimulating
economic growth to create
jobs. "He´ll have to jump on the
gas pedal hard, and that's
where you´ll get the real infla
tionary threat," says Michael J.
Howell, director of global
strategy for Baring Securities
Group. While such an infla
tionary course would not win
Clinton any friends on Wall
Street, it might improve his
chances of re-election in 1996.
As any good investor knows,
unemployment rates swing
more votes -and politicians
than stock-market indexes.