Presidential Elections - Kerry's Victory to Bring Stronger Long-term Benefits for US Stock Market

ZEW survey among financial experts in October 2004.

As soon as uncertainty retreats from the American stock market after the presidential elections on November 2, US share prices will presumably gain two to three per cent in the same month. This is the result of a survey conducted by the Centre for European Economic Research (ZEW), Mannheim, among 182 financial analysts and institutional investors in October 2004. If George W. Bush is re-elected, financial experts expect share prices to rise by about three per cent, a slightly stronger increase than in the event of John Kerry's election (two per cent).

In the long term, however, the US stock exchange would perform better under President Kerry. The experts assume that four years of Kerry in the presidential office will boost the Dow Jones by an average of six per cent per year, whereas Bush's re-election is expected to trigger an annual average growth of merely 4.7 per cent in the same period of time. These forecasts reaffirm the long-standing observation that Democratic presidents tend to have a more positive impact on share markets than Republicans.

Under each presidential candidate, different factors will influence the stock exchange. According to the experts, the stock market may benefit from Bush's expansive fiscal policy including tax cuts and increased military spending. Under Kerry, however, it would gain positive impetus thanks to the planned international policy of détente and debt repayment efforts to consolidate the national budget. All in all, this indicates that, in the long run, the stock exchange rather benefits from budgetary consolidation than from a more expansive fiscal policy.

Contact

Volker Kleff, E-mail: http://kleff@zew.de