NEW YORK, Sept. 2 -- The stock market went whisper quiet this week as Republicans convened in Madison Square Garden to renominate George W. Bush for president.
But don't mistake the silence for political apathy: Wall Street traders and money managers are busy trying to figure out the best way to play the 2004 election.
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Market Impact Average percentage change of S&P 500 in the year following presidential elections won by incumbents, lost by incumbents and those in which no incumbent was running.
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Think Democratic nominee John F. Kerry will beat Bush in November? Then many on Wall Street say wind-energy producers and biotechnology firms could be smart stocks to buy.
Think Bush will cruise to a second term? Then load up on pharmaceutical companies and asset-management firms. Think it doesn't really matter who wins? Chances are you're wrong, Wall Street analysts and some economists say.
"Politics directly affects the market and the economy," said Brian Knight, a Brown University economist who authored a study on how the 2000 election affected a group of 70 stocks. "Republicans are good for certain industries, and Democrats are better for others."
Knight added, "For some industries, up to 15 percent of market value seems to be affected by which party is in the White House. That's a substantial effect."
Gregory R. Valliere, chief political strategist for the nonpartisan Charles Schwab Washington Research Group, said the biggest impact of a Bush loss could be in the regulatory arena, where a President Kerry could make major policy without having to push legislation through what is likely to still be a Republican-controlled Congress next year.
Valliere noted that Kerry supports allowing consumers to purchase prescription drugs re-imported from Canada and overhauling the Medicare drug plan. "That's a concern for drug stocks," he said, citing companies such as Pfizer Inc. and Eli Lilly and Co.
A Kerry win, he said, could boost shares in Fannie Mae and Freddie Mac. Both have been under fire recently, but Kerry is viewed as friendlier to the government-sponsored mortgage-lending firms.
Kerry has also said he would spend more money to secure seaports, airports and borders, which could boost the stocks of construction and engineering firms that work in those areas, several market analysts said.
