Market Bucks Bush Loss

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The New York Sun

It was an intriguing aftermath to Thursday’s presidential debate. Wall Street’s man – President Bush – lost and the market sparkled Friday, racking up a rousing Dow gain of 112 points.


It suggests that John Kerry may not be the market Frankenstein he’s supposedly cracked up to be, and he seemingly decimated, at least for the moment, a conspicuous Wall Street view that a Kerry presidency would undoubtedly damage the market.


A number of key polls (Gallup, CBS, and ABC) clearly gave the nod to the Massachusetts senator, which, in turn, could give him renewed momentum in the election campaign.


At dinner Saturday night, Senator Dodd, a Democrat of Connecticut, summed up what I basically got from a sampling of about eight Wall Street professionals I queried about the debate. “Mr. Kerry killed the president,” he told me. Of the eight pros, seven thought Mr. Kerry had won, while one termed the debate a draw.


One of the harshest critiques came from money manager Leonard Mohr of MCR Associates, Los Angeles. “Two more debates like the first one and the president could debate himself out of the White House,” he said.


Prior to Thursday’s clash between the two candidates, a number of pros thought a Kerry win in the first of three scheduled debates might send stocks skidding since his views definitely worry the Street, conjuring up as they do concerns about higher taxes, tougher regulations and possible trade barriers. Friday’s robust market rally would seem to at least explode that stock market myth, although some pros thought the market’s resiliency that day may have stemmed from the fact that the President was leading in the polls before the debate and that trend would likely to continue.


Last week, money manager Tom Postin of Los Angeles-based P &W Partners, told me he thought a strong showing in the debate by Mr. Kerry could hurt the market’s near term results. He had also thought Mr. Bush would win the debate. “I was wrong on both counts,” he said. “Mr. Kerry came off more presidential; Mr. Bush came off as a whiner, somewhat confused at times, tired and agitated. As a result, I think Mr. Kerry, who had been trailing in the polls, now has a new lease on life, although I still think he’ll lose the election.”


Investment strategist Bill Rhodes of Boston-based Rhodes Analytics thinks “both guys made their points and I’d rate it a draw. The news,” he believes, “is Mr. Kerry wasn’t trounced, that he didn’t roll over, and he came off better than when he went in because he didn’t lose.”


Mr. Mohr thinks Friday’s market strength in the face of the debate’s results was unwarranted. The market should have gone down that day, not up, he said. He believes the market may be short-changing the impact of the Kerry victory, and the possibility of a Kerry presidency, especially as it relates to tax implications. “I think if you see Mr. Kerry rebound strongly in the polls and pull ahead of the president, stock prices will come under pressure, and they should,” he said. “I’m still of a mind,” he added, “that a Kerry win in November would push down the averages by about 5% to 8%.”


The presidential debate aside, Mr. Rhodes, who doles out investment advice to about 160 clients with assets of roughly $2 trillion, doesn’t expect the market to perform too well over the near term. He points, in particular, to a number of unfavorable signs, such as the lack of direction, the market’s inability to break out of the narrow 5% trading range it has been in since March, the lack of leadership (“the rush into energy,” he says, “is not good for the rest of the market”) and practically no public participation. “It’s really difficult to trade anything profitably within the current trading range,” is the message he’s getting from one client after another.


Interestingly, while he doesn’t see anything wrong with the economy, what with inflation bottoming out, he does point out that technology, the front edge of the economy, is lagging. Observing that the economy is stable enough to enable the market to break out on the upside, he nonetheless feels any advance will be tempered by national uncertainty related to terrorist concerns. Mr. Rhodes also expresses concern over the worsening trade deficit. “We’re importing almost twice as much as we’re exporting and we just can’t do that forever,” he said.


So given his concerns, he sees a continuing drift downward.


The New York Sun

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