We left off last week with Nixon and his resignation from the oval office in 1974. We also talked about stock market returns by decade, and how these returns seem to reflect political turmoil. We'll dig right in to talk about two possible reasons why the stock market average during the 1970s rose only 5.82% - even less than in the turbulent 60s, when the return was 7.78%.* The Watergate Scandal counts as one problem, because America's faith in their president was shattered with the first presidential resignation. The other problem was near-record highs in inflation and interest rates. Neither Gerald Ford nor James Earl (Jimmy) Carter, Jr. could dig a way out of America's financial mess after Nixon's term.

Ford faced a difficult time following Nixon's resignation, and his presidential pardon for Nixon set the tone for his administration. Many people saw this pardon as a continuation of the previous term's scandal. Although Jimmy Carter created energy conservation programs and more jobs, he was also plagued by the year-long hostage situation in Iran, which ended the day he left the Oval office. Many analysts feel that Ronald Reagan, a former president of the Screen Actors Guild and a TV show host, won the 1980 election hands down as a result of these continuing political and financial problems.**

Reagan was very skilled in front of the TV because of his previous on-screen experiences. Approximately three months after Reagan was in office, he was wounded in an attempted assassination. His escape from death and his optimistic attitude about this event seemed to turn America on. He also seemed to have some persuasive answers to ongoing financial questions. During his first term, Reagan convinced Washington and the rest of the world that his "Reaganomics" would work. Soaring confidence assured the success of his plans (or visa versa), and the 1980s began to look up.

Not too many people remember Geraldine Ferraro, but she was the first woman to run as a candidate for Vice-President. She was running mate with Walter Mondale on the democratic ticket against Reagan and George Bush, Sr. in 1984. It was a bold move for the democrats to choose a woman for this ticket, but the timing was not for this choice. This election was too close to the events of the previous decade, when assassinations and the Vietnam War lingered in many memories. Economics, however, were beginning to appear positive, and no one seemed to want to risk losing this momentum. Reagan and Bush won this election.

By the end of his second term, Reagan's legislations and his tax code revamp granted Americans the longest recorded peacetime prosperity to that time. The stock market returns for that decade were 17.57%, almost triple the previous decade's returns. This number reflects the upward turn toward a more settled environment. Oh sure, problems still existed, but it seemed that Americans could focus more on re-creating wealth than on war or riots. This was the era of the disco-ball, and everyone was dancing.

George W. Bush, Reagan's Vice President, won the next election against Michael Dukakis. During President Bush, Sr.'s single term in office, a number of things happened to make the stock market maintain momentum. The Berlin Wall fell, ending over 40 years of Cold War. In 1991, the Soviet Union dissolved, and we entered a phase of relative disbelief over the rapid developments. Desert Storm, probably the shortest war on record (as far as actual combat to that time), was a plus for the economy simply because it was so short. Additionally, news traveled faster than ever when home computers hit the market in 1989. A person did not have to count on the president to deliver the messages, like Roosevelt's audiences did in the 1930s. Although these advances in communications and relative world peace seemed promising, a faltering deficit was one reason Bush Sr. served a single term.

Democrats William (Bill) Clinton and Al Gore took over the White House in 1993 and they offered plenty of fodder for TV audiences during the rest of this decade. One stellar accomplishment was the combination of relative peace and prosperity. Clinton was the first president known to manage a budget surplus. During the 1990s, the stock market averages shot up 18.17%, closer to the 1950 average of 19.28% than any other decade since that time.

Another very subtle change during the mid- to late-1990s was the introduction of stock market Internet services and an increase of TV advertisements promoting their online presence. As computers improved and the market for these items remained steady, many computer companies "shot through the roof," and just as many people made a great deal of money on the market. However, this was all to change, and there is no one reason to point to for the ensuing problems.

At the end of 2000, the presidential election, for the first time, was undecided. This time the candidates were George Bush, Jr., Al Gore, and Chad (just kidding). This was the first election that resulted in a delay to determine the president. The delay, perhaps, made us all feel a bit uneasy, and uneasiness is never good for market conditions. The terrorist attacks on the World Trade Center on 11 September 2001 resulted in Wall St. closing for four business days. This was the longest closure since 1933. Although the reopening on September 17th resulted in record volume, the DJIA dropped 7.12% that day.

Other problems, like corporate scandals and failures, the war in Iraq, and job losses led to a tough four years. Whether these problems were created overnight or as a result of the flashpoints created in the 1990s is for future historians to decide. This year, we're about to make history again with yet another election. Will this year be any different than previous years? We'll see you next week to look at some charts and talk about the possibilities.

Until Then,
Linda Goin

* The percentages for this article were taken from Stock Pick System Stock Market History Page. Other interesting statistics can be found at Index Funds Advisor and "Essays on the Stock Market and What Young People Should Invest In" by Edward Renshaw, Professor of Economics, State University of New York at Albany.
** For more information about each president's administration, either visit the White House Presidents web site or type each president's name into a search engine to read various opinions.

The securities markets are subject to the risks of fluctuating prices and the uncertainty of rates of return and yields inherent in investing and past performance is no guarantee of future results.