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November 8, 2000

Election Still Too Close To Call
By Julie Rannazzisi,

Any Post-Election Pop in Market Won't Last ... Weiss comments

NEW YORK - The Dow Industrials cracked the 11,000 mark Wednesday while investors moved out of technology issues awaiting the outcome of the tightest presidential race in 124 years.

While the race has yet to produce a new resident in 1600 Pennsylvania Avenue, an anticipated victory by Republican candidate George W. Bush is pushing the stock futures markets higher and bond markets lower.

Bleary eyes reign on Wall Street as market participants await a recount in the State of Florida, upon which the results hinge with 25 Electoral College votes up for grabs. Bush currently holds a slight advantage over Vice President Al Gore in Florida.

Overseas markets reacted favorably when a victory by Republican candidate Bush was initially declared based on a projected win in Florida - which later turned out to be too close to call.

"We'll be waiting for a while. A recount in Florida will take some time," remarked Art Hogan, chief market strategist at Jefferies & Co. "The initial pop in European markets when Gore conceded the race is likely an indication of how U.S. markets will react," Hogan added.

"We'll see a short-term reaction in the market," Hogan said. But it'll soon be business as usual in no time, he conceded.

On the surface, Bush's proposed fiscal policies are more favorable for stocks. But if Bush emerges as the winner, Hogan said, his agenda won't be implemented in its original form and shouldn't make much of a difference to the market in the long run.

Market participants favor gridlock - meaning a split government - which is viewed as perpetuating the status quo. Americans don't want to see this decade-long expansion end. After all, it has produced outsized gains in the stock market over the past five years.

If Bush takes the Oval Office, the interesting twist for the market would be contending with one party both in Congress and in the executive branch.

Hogan doesn't see any broad, sweeping changes in fiscal or monetary policy since it will remain difficult to get agendas through.

"I think margins are so tight that it doesn't really matter who [controls] Congress. The majority is too narrow for either candidate to have a mandate," Hogan said.

Election Day has everybody on edge. But whether it's Al Gore or George W. Bush who is our next president, the bull market of the last decade won't return.

Both candidates are pro-business -- Gore for the technology and Internet sectors, Bush for the energy and drug sectors. But going beyond the elections, the fundamentals still point to a downturn in the economy and a drubbing for the stock market. Beaten-down tech stocks are still highly overvalued, and the struggling Nasdaq is poised to fall much further. The Dow, which has rallied strongly over the past few weeks, will drop like a rock once the election frenzy has passed.

The reason? Anyone reading the business news has seen all of the dot-com failures in recent weeks --Webvan,,, the list goes on. The Internet sector is clearly teetering on the edge. In addition, corporate bond downgrades by ratings agencies S&P; and Moody's are becoming epidemic. Tech and blue-chip companies such as AT&T;, Xerox, and Gillette have been downgraded or put on negative watch. This makes raising operating cash especially difficult for some businesses and raises the odds that many more companies will default on loans.

Finally, as the economy continues to slow, company earnings and revenues will continue to disappoint investors. The presidential elections don't change any of this. It just postponed the inevitable so the markets could have one last hurrah.

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