Capital Markets

Election Uncertainty Short-Lived

Stocks markets respond healthily, in contrast to the month-long malaise after the 2000 election. Now the president must return to a lengthy to-do l... StaffNovember 3, 2004

Sen. John Kerry, the Democratic challenger for the White House, has conceded the election to the incumbent, President George W. Bush. After telephoning the president this morning, Kerry made a public statement Tuesday afternoon.

Kerry’s concession brought a quick end to the uncertainty that seemed to be troubling the markets as November 2 approached. On Tuesday, in the face of very heavy voter turnout — widely seen as a good sign for the Democrat — and exit polls that also suggested a good showing by Kerry, stocks fell on the prospect of change in the Oval Office. (In 2000, that period of uncertainty hamstrung the markets for nearly a month.)

Wednesday, after Kerry congratulated Bush on his victory, stocks soared. At market close, the Dow Jones Industrial Average was up more than 1 percent, posting a triple-digit gain and establishing some breathing room above the 10,000 mark. The Standard and Poor’s 500 and the Nasdaq also rose about 1 percent; for the Nasdaq, that showing enabled the composite index to clear the 2,000 hurdle.

Now President Bush and Corporate America can return to a lengthy to-do list that includes dealing with:

• Huge, persistent U.S. budget deficits;
• A looming crisis at the Pension Benefit Guaranty Corp.;
• Health-care costs that continue to rise, though they seem to be slowing somewhat;
• High oil prices, coupled with heavy dependence on foreign supplies;
• Low corporate confidence;
• An imminent strain on the Social Security fund as more baby boomers approach retirement;
• And — for those who hadn’t heard — replacing Alan Greenspan when the chairman of the Fed retires at the end of his final term, in January 2006.

As for the 109th Congress, the president will be able to count on stronger Republican majorities in both the House and Senate to help with the economic turnaround.

On one specific legislative matter — a bill opposing the efforts of the Financial Accounting Standards Board to require that companies expense the value of stock options — the few changes to the Senate leave its future uncertain.

All the senators who ran for reelection and who had taken a strong stand for or against FASB’s efforts held on to their seats. They include Richard Shelby (R-Ala.), the chairman of the Senate Banking Committee — who has prevented an anti-expensing bill from seeing a full vote on the Senate floor — and six other members of the committee.

Peter Fitzgerald (R-Ill.), who has also campaigned against the anti-expensing legislation, did not run for re-election; his seat will be filled by Barack Obama, the keynote speaker at the Democratic national convention. At press time, Obama’s position on expensing is unclear.