Wall Street saw a Bill Clinton win coming and suffered an anxiety attack throughout the fall. Now, with the Arkansas governor actually headed to the White House, it is able to relax, take a deep breath and put appropriate investment strategies to work.
Whatever Clinton's actual economic plans may turn out to be, the fact is, our president-elect is inheriting a difficult economy, an overpriced stock market and astonishingly low interest rates.
"Four years from now, we'll likely be saying the stock market was better under President Bush than it was under President Clinton, but that's because the Bush term ended with the market overpriced," predicts Norman Fosback, president of the Fort Lauderdale, Fla.-based Institute for Econometric Research, which publishes numerous investment letters. "Interest rates will probably be higher under Clinton, causing a decline in the value of long-term bonds, but that's because the Federal Reserve pushed interest rates to their lowest level in 30 years and left little room on the downside."
Quality stocks of companies that can help improve the nation's infrastructure, a major theme in Clinton's industrial policy, include Kasler Corp. and Granite Construction, says Fosback. His "best buy" picks in stock funds include Twentieth Century Ultra, Janus Twenty Fund, Kaufmann Fund, Monetta Fund and Fidelity Low-Priced Stock Fund.
Because bonds may be risky, Fosback is sticking with shorter-term bond funds averaging two to four years in duration. Favorites are T. Rowe Price Short-Term Bond, Vanguard
Short-Term Government Bond, Vanguard Short-Term Corporate Bond, Fidelity Short-Term Bond and Scudder Short-Term Bond.
"The Clinton victory is a mandate for change, to get the country moving, to make things like they used to be," observes Marshall Acuff, chief investment strategist for Smith Barney, Harris Upham & Co. "Unfortunately, I don't think any of the presidential candidates were capable of obtaining the economic growth of years ago, because that day is past, and we're looking at 2 percent long-term growth, not 3 percent."
However, the push toward public works and infrastructure improvement should aid stocks such as Dresser Industries, York International, Fluor Corp. and Emerson Electric, Acuff believes.
Natural-gas companies will benefit from greater emphasis on improving the environment, with Burlington Resources and Consolidated Natural Gas good selections. Companies selling their products outside the United States, where the bulk of consumers are, should prosper most, he adds. McDonald's Corp., Avon Products and Procter & Gamble fit neatly in this category.
"The election that made Bill Clinton president will become a sidebar, since credit contraction by consumers will result in slow economic growth for a while," says Charles Clough, chief investment strategist for Merrill Lynch & Co. "It's cute to put together a Clinton investment portfolio, but the fact is there would be sluggish growth for some time no matter who was elected, and I personally think that means interest rates will be even lower than they are today."
Based on a likelihood that the investment theme of the 1990s will be productivity and substitution of low-cost technology for labor-intensive production, Clough recommends stocks of semiconductor firm Intel Corp., data services company Automatic Data Processing and long-term health care service Health Care & Retirement Systems. There are bargains among thrift stocks, Clough believes, among them Standard Federal Bank of Michigan and Washington Federal S&L; of Seattle.
"The bond market has been unpredictable ever since it appeared Clinton would win, and, with a tendency toward higher rates, I'd keep my bond maturities short term," adds Ross Levin, president-elect of the International Association for Financial Planning and president of Accredited Investors in Minneapolis.
Diversity will be important over the next four years, says Levin. Royce Value Trust (a closed-end fund), Janus Twenty and the Yachtman Fund are his preferred fund choices.