SCBA..Try this read on the market ahead.
15:16 DJS As Starr Files Report, Analysts Say Market Could Weather Resignat
15:16 DJS As Starr Files Report, Analysts Say Market Could Weather Resignation
NEW YORK -(Dow Jones)- As Independent Counsel Kenneth Starr sent his
report on possible impeachable offenses by President Clinton to Congress,
analysts tried to calm jittery investors by saying that the stock market
should be able to weather a resignation.
The report, posing the gravest threat to a president since Watergate,
was sent to House Speaker Newt Gingrich (R., Ga.)malong with numerous boxes of
suppporting material. The filing came just hours after four Judiciary
Committee aides spoke with Starr's office, the first contact between the
prosecutor and the panel since the Monica Lewinsky inquiry began in January.
The developments came on a whirlwind day in which Gingrich met other
leaders from parties to prepare for the report. Clinton, meanwhile, apologized
anew for his conduct, both in a private, emotional meeting with House
Democrats at the White House and later during a trip to Orlando, Fla.
A host of market strategists say the likely result of a Clinton
resignation would be a quick, knee-jerk reaction to the downside. Some said
the Dow Jones Industrial Average could drop to recent lows of about 7500,
which most also said would present a good buying opportunity.
All agreed the uncertainty that would be created if Clinton left office
- particularly for foreign investors - wouldn't help stocks, but noted that
many of the things important to the market wouldn't change: Congress would
still be controlled by the Republicans, the economy would likely remain strong
and, perhaps most important, Federal Reserve Chairman Alan Greenspan wouldn't
be affected.
"Right now, Clinton is rather powerless to begin with, and,
fortunately, Greenspan is running things," said Tony Dwyer, chief market
strategist at Ladenburg Thalmann & Co. "I don't think it would be that big of
a deal, but probably more so to foreign investors."
That was a common view of strategists, who noted that foreign money has
been key in contributing to the spectacular gains in U.S. stocks in the past
few years. The effect of Clinton's leaving office on foreign investors was
seen as the biggest concern facing the market.
"I think it would be viewed by foreign investors as something they
would rather not deal with," said Bill Meehan, market strategist at Cantor
Fitzgerald, who was among the more bearish strategists given a resignation
scenario.
But Al Goldman, chief market strategist at A.G. Edwards & Sons Inc.,
said a selloff in the first hour-and-a-half after the resignation - perhaps as
little as 200 points - would be followed by the realization that there were
bargains to be had.
"After the initial shakeup, people would ask, 'Does this affect the
outlook for the economy and corporate earnings?' And the answer will be 'no,'"
Goldman said. "The market doesn't like uncertainty, but the office of the
presidency is a figurehead as far as the economy is concerned. I think the
selloff would be modest and would mark a chance to buy."
Several market analysts said much of the scandal facing the President
is already factored into the market. "If it were a quick resignation, there
would be less of a cloud hanging over the market," said Peter Cardillo,
director of research at Westfalia Investments. "That scenario would probably
be a blessing for the market, but a drawn-out impeachment process would be
very negative."
Analysts said they believe a long impeachment process is unlikely, but
agreed that if it were to happen stocks would suffer worse than under a swift
resignation scenario.
Drawing comparisons to the resignation of former President Richard
Nixon, market watchers said, gives short shrift to the nation's current
economic backdrop. "When Nixon stepped down the economy was in trouble," said
Joe Battipaglia, chief investment strategist at Gruntal & Co. "The economy now
is in good shape, and the market could weather this a lot better than if
things were more perilous." Indeed, the stock market was already in the midst
of a bear market when Nixon left office in 1974.
Battipaglia believes a presidential resignation would probably lead to
a retest of earlier lows on the Dow industrials "fairly quickly." Longer-term,
market pros said a Clinton resignation would have almost no impact on the
stock market. "The only thing that bothers the market over the long term is
the outlook for corporate earnings," said Goldman.
Copyright (c) 1998 Dow Jones & Company, Inc.
All Rights Reserved.
09/09 3:16p CDT |
