Bush¡¯s victory and stock markets

As George Bush, the candidate of the Republican Party, won the U.S. presidential election, public attention is now focused on what effects his victory will have on the domestic stock market.

Local market analysts have predicted that the result of the U.S. presidential election will inevitably have a great influence on the domestic stock market. In light of the recent trend of U.S. and Korean stock markets moving hand in hand, chances are high that popular items in the U.S. market would also emerge as theme shares in the Korean market.

Favorable event for the U.S. stock market

It is generally viewed that Bush¡¯s victory will affect the U.S. stock market favorably. While campaigning for the presidency, Bush showed a relatively friendly attitude toward companies by promising that he would reduce government intervention and regulations as much as possible and push for tax cuts worth US$1.3 trillion. As a result, top managers on Wall Street supported Bush. In the case that U.S. shares rise in the wake of the announcement of the election result, it is very likely that the local market will also see gains. But some people say that it is too early to predict the movement of the U.S. stock market following the U.S. presidential election. There are a number of unfavorable factors lurking such as the escalating unrest in the Middle East, the possibility for international oil price hikes, the uncertain profitability prospects for U.S. companies and the strong dollar, they note. They claim that the future movement of the U.S. stock market depends more on whether the U.S. economy will make a soft landing than the election result.

Stock items to see benefits

With Bush coming to power, there is a greater chance that stocks in traditional industries will see gains both in the U.S. and Korean stock markets. Even before his election, domestic and foreign analysts alike predicted that Bush¡¯s victory would boost traditional stocks while Gore¡¯s election would promote hi-tech items. Some of them even forecast that domestic hi-tech firms would see their profitability aggravate due to increased loyalty payments and defense budgets. On the other hand, the U.S. government¡¯s control on drug prices was expected to be relieved and the shares of U.S. pharmaceutical companies would rise. This would in turn benefit Korean stocks related to the pharmacy industry, analysts said. A researcher of Shinhan Securities also said that Bush¡¯s election could lead to heavier trade pressure on Korea. He predicted that if the government takes measures to protect U.S. industries along with the overall U.S. economic contraction, it would push down the share prices of domestic exporters to the United States in the long term.