And they have lost confidence in Bush:
“Everybody thought this was going to be a decent year,” said Michael Mullaney, who manages $10 billion in stocks and bonds for Fiduciary Trust Co. in Boston. “It’s not happening,” and “you ask yourself if the problem is the current administration or if the problem is the economy.”
“It was pretty sad,” said the 50-year-old Mullaney, recounting how he and his colleagues last week decided to put their money in cash because they’ve lost confidence in the securities markets. “We are totally unenthusiastic about bonds at this point, and the truth is, we are not enthusiastic about stocks as well.”
“Investor confidence drives the market more than anything else,” said Robert Shiller, the Yale University economist who predicted the end of the dot-com bubble in his 2000 book “Irrational Exuberance.” “The market was only supported by the perception that it’s going up, and that perception is increasingly fading,” he said from his office in New Haven, Connecticut. “Investors are getting more and more fed up with the whole thing.”
Investor optimism has dropped to a level unseen since 1998. The State Street Investor Confidence index slipped to 84.3 in July, its sixth decline in seven months, from 109 at the start of the year.
“Investors are concerned that the here-we-go-again story is back” and that “we are looking at the bleak possibility of an economic slowdown with inflation,” said Timothy Leach, chief investment officer of U.S. Trust Corp. in New York. Leach, who oversees $103 billion, said, “Clients are feeling just like they need to take more of a cautious stance.”
All of this may be bad news for President Bush’s re-election bid. Since World War II, the S&P 500 declined from the start of the year to the date of a presidential election only twice, in 1960 and 2000, according to Bloomberg data. The incumbent party lost in both contests, as it did in 1992, when the benchmark had its smallest gain in a postwar election year.
“If Iraqi cities go up in flames, so do Bush’s re-election hopes,” said Harry Markopolos, who oversees $900 million as chief investment officer at Rampart Investment Management in Boston. “And if oil prices keep rising, so do Kerry’s chances of winning.”
A registered Republican who has never supported a Democratic presidential candidate, Markopolos, 47, said he’s voting for Kerry this year.