Article: "Four more years!"

http://premium.money.cnn.com/pr/subs/magazine_archive/2004/11/SELA.html
again I will copy and paste it for everyone:

From: Money Magazine
The market: "Four more years!"The prospect of a Bush defeat has been holding back big investors, argues political analyst Greg Valliere. But does it really matter who is in the White House?
Interview by Jon Birger; Greg Valliere
November 2004 Vol. 33 No. 11
One of Washington's longest winning streaks is on the line this ElectionDay. Greg Valliere, chief political strategist for Schwab SoundviewCapital Markets, has correctly predicted every presidential electiongoing back to Jimmy Carter's win over Gerald Ford in 1976. Four yearsago, he predicted a George W. Bush win, and he did so on Memorial Day.This election, Valliere waited till July to make his call, and onceagain he's going with Bush. But the tea leaves also tell Valliere thatW's margin over Democratic challenger John Kerry will be very narrow. By the time you get the next issue of this magazine, we'll all know theanswer. (Barring another hanging-chad crisis, that is.) But it may takea little longer to sort out the implications of the election results forour portfolios. In September, Valliere sat down with MONEY to talk aboutwhich investments have the most to gain from a second Bush term, andwhich ones could win if it's Kerry who dances at the next inaugural ball.
Q. How much do elections really affect the markets? A. For a wide range of stock sectors—health care, energy, etc.—a changein regulatory policy means big changes for shareholders. And in general,you'd have to say that a Kerry presidency would be more adversarial froma regulatory standpoint.
Q. But four years ago, everyone was saying that Bush's tax cuts would beterrible for the bond market. And in 1992, everyone thought Clintonspelled doom for health-care stocks. Both calls were wrong. A. Granted, it's hard to go back and quantify a direct correlationbetween an election and the performance of a specific security. For onething, investors are savvy. They anticipate, and often you have ananticipatory move well before an election. I also think it's incompleteto look at an election's impact without taking into consideration whocontrols Congress. And there's a third factor as well. Not to talkmyself out of a job, but there are factors that sometimes dwarf what'sgoing on in Washington. Where we are in the economic cycle is usuallyfar more important.
Q. In other words, a President's economic success or failure oftentimeshinges upon when he's elected? A. Exactly. In terms of catching the economic cycle on an upswing, it'sbetter to be lucky than good. One could argue that Bill Clinton caughtthe cycle at a very fortuitous time.
Q. Let's assume that Kerry stages a successful comeback. Given thelikelihood Republicans will still control Congress, does that mute thepotential impact? A. Absolutely. It is a mistake to assume that Kerry would be better forbonds. He may be more vigilant about deficits and he may talk to [formerTreasury Secretary] Bob Rubin, but I think the chances of him undoingall the Bush tax cuts are close to zero. The House of Representativeswould become a huge roadblock for Kerry.
Q. You still think Bush will win? A. I've got Bush with a very narrow victory. There are some people nowsaying that Bush is going to win comfortably, and I really reject that.I guess I can't believe that Kerry's campaign will stay this lame. Ithink he'll get more traction on domestic issues—particularly theeconomy—than on Iraq or terrorism.
Q. I'm assuming most of your institutional investor clients prefer Bush. A. They do. I think one reason the markets were so choppy this summer isthat it looked like Bush might blow what had seemed an easy re-election.
Q. The conventional wisdom is that Republicans are better for stocks.And yet stocks have usually performed better under Democrats. What gives? A. Clinton had great stock numbers, but remember, there was gridlockthen. Republicans controlled one or both of the houses for much of theClinton administration.
Q. Are there any sectors or stocks that would benefit from a Kerry win? A. Fannie Mae [FNM] and Freddie Mac [FRE]. They're the rare case whereKerry would probably be more gentle than Bush. The Bush people wouldprobably try to tighten regulation of both of them. Jim Johnson [aformer Fannie CEO] is one of Kerry's top advisers.
Q. You've noted that Bush's Justice Department has been slow to pursueEnvironmental Protection Agency findings of clean-air violations bySouthern Co. (SO), Xcel Energy (XEL) and other power companies. Do youthink Kerry would be tougher? A. I do. There would be a much different climate for those companies. Q. You think makers of generic drugs could benefit under Kerry. Why? A. Kerry could go to his director of Medicare and say, "Look, we shouldcurb Medicare-reimbursement rates for prescription drugs and focus moreon generic drugs." That's why if by late October it looks like Kerry isclosing fast, I think it would be a plus for the generics and a clearnegative for the likes of Pfizer [PFE] and Eli Lilly [LLY]. Q. What should investors expect to see from a second Bush term? A. Making the tax cuts permanent would probably be his top priority. Hehas a chance with the 15% capital-gains and dividend taxes. I think hehas no chance making permanent the abolition of the estate tax orkeeping the top income tax rate at 35%. The votes just aren't there. Q. Do you expect more spending restraint? A. I do. Bush has been embarrassed by conservatives who allege that he'sbeen profligate. The juiciest target for spending cuts isMedicare-reimbursement rates. If Bush is re-elected, there is going tobe an attempt at a sharply reduced rate of payment increases for HMOs,nursing homes and hospitals. I think those stocks could be vulnerable. Q. Speaking of big targets, will Bush do anything about Social Security? A. You'll see something from them on retirement reform. I'd expect tosee another proposal for retirement savings accounts. They might proposeletting people take part of the FICA tax and put that into their ownaccount with some very plain-vanilla investment options. Q. Out of curiosity, how does one become a political analyst for WallStreet? A. My background is journalism—in fact a lot of people here at Schwabhave a background in journalism. Journalists have good BS detectors. Q. I think mine is going off. A. [Laughs.] No, I'm serious. You're always being spun in this city.Everything needs to be taken with a grain of salt. VALLIERE'S TAKE• BUSH WINS But Kerry can stage a comeback.• STOCKS The market prefers Bush.
• DEFICITS Even if Kerry wins, Congress will thwart him on taxes.