Newspaper article THE JOURNAL RECORD

No Dampening Seen on Stock Market Due to Iran Arms Crisis

Newspaper article THE JOURNAL RECORD

No Dampening Seen on Stock Market Due to Iran Arms Crisis

Article excerpt

NEW YORK - The crisis over the Reagan administration's secret arms shipments to Iran and the dismissal of two key White House aides over the transfer of funds received from Iran to Nicaraguan ``contras'' has thus far had no perceptible effect on the stock market. Last week investors pushed the Dow-Jones industrial average up to 1,916.76, just a bit below its record high of 1,919.71.

Tuesday, meanwhile, the market rocketed past the record to close at 1,955.57, scoring one of its best one-day gains ever.

The way the markets have shrugged off not only the Ivan F. Boesky affair and Wall Street's spreading insider scandal but also the most serious crisis President Reagan has faced appears to reflect investors' judgment - or their wishful thinking - that nothing has happened that will seriously hurt the stock market.

They seem convinced that the Iranian affair will not bring down the president or force a drastic change in the economic, financial and deregulatory policies that produced the long stock market boom.

Scudder, Stevens & Clark, a leading dealer in mutual funds, has called this ``the greatest bull market in modern history,'' with the Dow skyrocketing more than 1,100 points in the past four years.

``This growth,'' as Scudder put it in a newsletter, ``is a welcome relief when considered against the backdrop of the prior two decades. When the rally began in 1982, the Dow was more than 200 points, or 20 percent, below the peak it had reached in the mid-1970s. Today's bull market has convincingly broken out of the long period during which the stock market had made no progress, despite some significant ups and downs.''

The caution with which the Democrats in Congress have treated President Reagan since the Iranian crisis arose encourages traders to feel that the White House is not facing another Watergate.

The market got some welcome news on the economic front this week. A surge in United States exports caused the nation's trade deficit to decline for the third month in a row. In October, the trade gap narrowed by $500 million, to $12.1 billion.

But, with net merchandise trade still likely to run between $165 billion and $170 billion in the red for 1986, up from $148.5 billion in 1985, this obviously does not mean that the trade problem is over. It does mean, however, that the fall in the dollar, especially against the Japanese yen and the major European currencies, is starting to narrow the gap. Further declines in the dollar against currencies that have been pegged to the dollar or have even risen against it appear to be in the cards for 1987.

Thus, the odds are that the trade gap will continue to narrow next year, not just from a lower dollar but from stronger expansion in Japan and Western Europe.

One important result of the narrowing trade gap should be support for the growth of this country's gross national product. …

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