All blue — Just as important as Senator Obama’s victory on Tuesday is the fact
that the Democrats won full control of Congress, with a large working majority,
suggesting that the next President may have Congressional support to potentially
turn much of his electoral platform into actual policy.
The first 100 days — The history of the presidency shows that the most
successful Presidents made clear the direction they intended their administrations
to follow prior to their election. The risk for Obama is that, early in his
administration, the credit crisis distracts him from his planned agenda.
Change — Obama shares a few things in common with first-termers JFK, Jimmy
Carter, and Bill Clinton: they were all Democrats replacing a Republican
incumbent, they were all young and inexperienced, and they all had a large
working majority — somewhat ominous then are the shaky starts that JFK, Carter,
and Clinton had to their presidencies.
The first postmodern populist — From Reagan through George W. Bush, the
American Presidency has just gone through a 28-year populist pause. Will
President Obama emulate Bill Clinton, who “posed as a New Democrat, an Old
Democrat, and ultimately, in effect, a moderate Republican,” or will he emulate
modern populists JFK and LBJ, big government social activists?
More at risk than well-positioned — Obama’s platform presents risks for: Brokers
& asset managers, coal miners, electric utilities, healthcare firms, luxury goods &
services, tobacco. Potentially well positioned: Renewable energy companies, lowend
retailers, generic drug manufacturers.
Change and investing — In general, the party in power does not dictate the
direction of the stock market, with fundamental factors, such as growth and
inflation, having much more significance. The Dow rallied in the period following
the election victories of populist Democrats Carter, LBJ, and JFK, and then
performed poorly following Carter’s inauguration (reflecting stagflation), but
continued to do well early during the administrations of LBJ and JFK (reflecting
economic stimulus). But the cumulative record of modern populism (1960 –
1980) was a stock market that zigged and zagged, and rose modestly in nominal
terms, but declined 47% in real terms.