Wall Street indifferent to congressional elections

BAD OMEN?:Some analysts see the potential for gridlock with Democrats in control of the legislature, while others cite the 1980s when divided branches worked together

AFP , NEW YORK

Mon, Nov 06, 2006 - Page 10

Wall Street is eyeing tomorrow's US election with remarkable indifference, even if it means a shift in party control of one or both chambers of Congress, analysts say.

The market has been on a steady rise, with the blue-chip Dow Jones Industrial Average notching record highs above 12,000 despite predictions of big gains for opposition Democrats, who now are in the minority in both the Senate and House of Representatives.

Art Hogan, market analyst at Jefferies and Co, said Wall Street would be able to live with Democratic gains even though the party is traditionally seen as less friendly to business.

"A victory of the Democrats will look on the surface to be bad for the market, the economy and business," he said. "People just assume that Republicans are more pro-business than Democrats. It's a popular misconception I would say. There are going to be some fears regarding health care, profits from multinational and oil companies, concerns over tax cuts being repealed."

Some see a potential for political gridlock with Democrats in control of one or both chambers. That is because President George W. Bush could veto legislation passed by a Democratic-controlled Congress, and lawmakers could block proposals from the White House.

But some say Wall Street would be happy to see Washington stay out of economic management.

"I think Wall Street would actually rally off this gridlock, because gridlock really means that nothing can get done," said Robert Froehlich, analyst at DWS Scudder. "And on Wall Street `no news is good news' from politicians."

Marc Pado, analyst at Cantor Fitzgerald, said many on Wall Street would welcome Democratic gains.

"People see the Bush administration as a sort of deficit-spending administration and they are tired of it," he said.

"People really want stability. They are OK with how things are, they don't want to mess with it in any big way. So the best way to do that is to have an opposition party" controlling at least one chamber, he said.

"Historically, when you have a Republican president and a Democratic Congress, the market in general has done fairly well," said Owen Fitzpatrick at Deutsche Bank, citing the 1980s under president Ronald Reagan.

Some market observers said Wall Street may not have fully grasped the consequences of a political shift in Washington.

"The market is fully aware that the odds favor the GOP [Republicans] losing control of the House and retaining the Senate," said Al Goldman at AG Edwards.