Newspaper article THE JOURNAL RECORD

Analysts See No Watergate Replay for Stocks

Newspaper article THE JOURNAL RECORD

Analysts See No Watergate Replay for Stocks

Article excerpt

NEW YORK -- With jitters in the stock market and suspense building over the investigation into the Monica Lewinsky case, memories are stirring on Wall Street of the bad old days of Watergate.

As that scandal unfolded in 1973-74, ultimately leading to the resignation of President Nixon, stocks suffered through their worst extended bear market of the past 50 years. The Dow Jones industrial average dropped 45 percent in a little more than 22 months.

So it is only natural now to ask how much of the stock market's recent weakness arises from uncertainty over the future of President Clinton's administration.

"The possible impeachment and conviction of a sitting president is a market risk factor that should not be dismissed," said Jim Griffin at Aeltus Investment Management in Hartford, Conn.

"Many investors are looking for an excuse to sell," observed Charles Pradilla at SG Cowen Securities in New York. "Continued uncertainty about President Clinton's legal problems could be the spark."

Nevertheless, both Griffin and Pradilla, and just about every other analyst who has weighed in on the subject, say they expect nothing remotely like a repeat of the 1974 experience in the markets.

"The Starr grand jury report should be ready within weeks," Griffin says. "Will it move the market? I doubt it. What matters in this market is weight of money."

Says Thomas Gallagher, who follows the Washington scene for Lehman Brothers: "The 1974 market, which plummeted as the Watergate investigation reached its climax, is not a good guide to how stocks might react now."

Gallagher says the 1973-74 bear market was "almost entirely explained by deteriorating economic fundamentals. Inflation tripled, oil prices quadrupled, short-term interest rates jumped 350 basis points, and consumer confidence fell by 30 percent. …

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