8/04/2005

Investors fear repeat of 2000 election turmoil - Nov. 2, 2004

Investor worry: No election winner
Markets on edge due to the possibility of protracted legal challenges to presidential election.
November 2, 2004: 3:28 PM EST



NEW YORK (CNN/Money) - As if near-record oil prices, a sluggish job market and jitters about the economy aren't enough, investors have been worrying about something else: another prolonged dispute over who's president after Nov. 2.

If what happened in 2000 happens again, and no clear winner emerges for weeks after Election Day, it will probably be a drag on stocks. In fact, some market experts say, the prospect of such uncertainty has been weighing on the markets for at least several weeks.

"I'm at a one-in-three chance that we will not know for days who won the election," said Greg Valliere, chief strategist at Schwab Washington Research Group. "I'd say it's a one-in-five chance we won't know at the end of November. There are thousands of lawyers who are looking at litigation in Ohio, in Florida and in Wisconsin.

"It's a cliche, but it's a true cliche that markets don't like uncertainty," he added.

Valliere is not alone in seeing a strong chance of a challenged election. Both political parties are far more prepared for court challenges than they were going into the 2000 election. Lawyers for the two sides were arguing before the U.S. Court of Appeals late Monday, with Republicans winning the right to have thousands of challengers present at polling places throughout Ohio.

And with polls showing a close race, one non-partisan election watchdog, Electionline.org, recently reported that there's a strong possibility that recounts, lawsuits and other disputes could delay a clear winner for weeks. At least one political pundit, columnist George Will, suggested last month it could be May 2005 before a clear winner is known.

The markets were weak throughout the six-week dispute over who won the 2000 presidential election.

The Standard & Poor's 500 lost 1.6 percent on Nov. 8, the day after the election when the uncertainty was first apparent to investors, and tumbled another 2.7 percent between Nov. 8 and the close of trading on Dec. 12, the day the Supreme Court issued a late-night decision that settled the election.

But even when the outcome was settled that night, it wasn't enough to turn markets higher.

The S&P lost another 1.5 percent the day after the Supreme Court decision, and it stayed relatively flat through the transition period that ended with Bush's Jan. 20 inauguration. And, of course, the bear market that began in 2000 continued throughout 2001.

Valliere and some other analysts say some of the recent weakness in the stock market is already due to a growing possibility of another prolonged period of post-Election Day uncertainty.


Investors fear repeat of 2000 election turmoil - Nov. 2, 2004

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