NEW YORK - President Bush’s victory in Tuesday’s election is shaping up as a potential bonanza for Wall Street, where firms are salivating about the possibility that he will follow through on his pledge to allow private investment of Social Security funds.
A second term for the Republican president also makes it likely drug makers can head off governmentmandated price controls for now. The defense industry also looks like a winner, more regulatory victories may be in store for the Baby Bells, and look for a new push for oil drilling in the Alaska wilderness.
While the privatization of Social Security has taken a back seat in this current election, experts predict the president will work with congressional Republicans, who boosted their majority in both houses, on what would be the most dramatic changes in the government retirement program’s 69-year history. In addition, the president has gone on record as supporting an increase in medical savings accounts for individuals.
Banks, investment firms, mutual fund companies and insurers, of course, would offer to help individuals manage these new private retirement investments, which could lead to billions of dollars in new funds under their control and higher profits if legislation clears Congress.
‘‘The Bush administration is more oriented toward what they call the ‘‘ownership society,’’ said Ken McCarthy, chief economist for vFinance Investments. ‘‘If people are going to have more control over their assets, people are going to need advice on how to manage those assets, and that can only help the financial services industry.’’
That, in turn, will make financial stocks more attractive, analysts said.
Likewise, dividend-yielding stocks — a popular asset class in the uncertain market of 2004 — will continue to be a solid option. One of Bush’s most popular first-term tax cuts was setting the dividend tax rate at 15 percent, rather than normal income tax rates of up to 38.6 percent. That tax cut expires in 2008, but it’s expected Bush will work to make it and many other tax cuts permanent.
‘‘It’s not coincidental that more and more companies are now raising their dividends. It’s the first time where it’s actually made sense from a tax perspective,’’ said Hans Olsen, managing director and chief investment officer at Bingham Legg Advisers.
In the end, however, after a trying year on the stock markets, most investors were simply glad to have the election decided. ‘‘The relatively flat performance of the markets this year is a reflection of the close race and people having no certainty over how things were going to be after Nov. 2,’’ McCarthy said. ‘‘It’s good to have this out of the way.’’
Status quo is good news for drug makers and investors in the stocks of companies like Pfizer and Glaxo-SmithKline, which were facing the potential of much tougher oversight on pricing under a John Kerry presidency. Consumer advocates counter that that’s bad news for average Americans.
Industry analysts say that with Bush in the White House and Republicans increasing their control of Congress, government price controls for prescription medicines won’t be on the table.
The free-market system, where demand drives price, will continue, said Barbara Ryan, a pharmaceuticals analyst and managing director at Deutsche Bank Securities.
Still, Bush may have to budge slightly on one of the most contentious issues for the industry, allowing reimportation of cheaper prescription drugs. ‘‘Reimportation may actually happen under Bush,’’ said pharmaceuticals analyst Tony Butler of Lehman Brothers, ‘‘but only from Canada.’’
HEALTH CARE FIRMS
Businesses have identified soaring health insurance costs as the most critical issue facing them today, but proposals by Bush aren’t likely to immediately slow the growth in spending for both companies and their employees.
This year, employers will pay on average of almost $7,300 for their share of the cost to insure a family of four and $3,137 for single coverage, according to the survey by the Kaiser Family Foundation and Health Research and Educational Trust. Premiums also rose for the fourth straight year at a double-digit increases rate.
Frank McArdle, manager of Hewitt Associates’ Washington office said Bush may be able to accomplish measures such as capping medical malpractice awards and lessening expensive mandates on what services insurers must provide.
But because of factors such as the aging population, expensive drugs and technology and the growing number of uninsured, ‘‘there is not going to be a huge relief in costs,’’ he predicted.
The president also is expected to renew his push for legislation that provides tax benefits to businesses and their employees if they contribute to Health Savings Accounts.
He also wants Congress to give low-income families a $1,000 direct contribution to their HSAs along with a tax credit to help them purchase insurance policies.
Firms that offer such policies such as Golden Rule Insurance Co., a division of UnitedHealth Group; Fortis Health, a division of Fortis and the American Medical Security Group may benefit.
HSAs allow Americans to use pretax money to cover medical expenses, but they must be combined with a high-deductible insurance policy.
While Bush signed into law last year legislation passed by the Republican-controlled Congress that provides a prescription drug benefit for Americans covered by Medicare, the program has been slow to gain consumer acceptance.
The measure also increased reimbursements to companies like Humana, Coventry Health Care and PacificCare Health Systems that run managed care programs for Medicare beneficiaries.
The president is likely to call on Congress to revive stalled legislation that would have allowed private companies to search for oil, coal and natural gas on federal lands currently off limits to exploration and production, including Alaska’s Arctic National Wildlife Refuge. Such a move, part of Bush’s plan to reduce the country’s rising dependency on imports, could benefit large petroleum producers such as BP PLC, Anadarko Petroleum Corp. and Devon Energy Corp.
Bush also wants to make it easier for the oil industry to build new refineries. There hasn’t been a new refinery built in the United States in 28 years and the industry complains about meager profit margins, hefty environmental costs and too much government regulation.
Bush will push Congress to require reliability standards for power lines and provide incentives for new power line construction, measures that are widely backed among power producers, such as American Electric Power Co., and makers of power grid equipment, such as American Superconductor Corp.
Opposition to new power line construction typically occurs among consumers concerned about environmental and health effects. Bush supports the construction of new nuclear-powered generating stations, but opposes enacting federal requirements for utilities to use renewable fuels such as wind, arguing that should be up to the states.
He favors market-based approaches to reducing pollution, but supports a 10-year, $2 billion governmentsponsored program to develop cleaner ways to burn coal, a potential boon to coal producers such as Massey Energy Co. and owners of coal-fired power plants such as Duke Energy Corp.
The president’s hands-off policy on energy prices is expected to continue. And he is likely to continue pumping oil into the government’s Strategic Petroleum Reserve and reject calls to use the government oil except to counter a major supply disruption.
In addition to benefiting from Bush proposals for Social Security privatization and health savings accounts, the nation’s brokerage firms and asset managers, including mutual fund companies, could be aided by a rising stock market.
‘‘This should give the incentive to investors to look at financial stocks of companies that would manage these private assets,’’ said Sam Stovall, chief investment strategist at Standard & Poor’s in New York.
‘‘And if we have more money flowing into the equity markets, the capital markets divisions of diversified financial service companies should do well.’’ Still, Bush’s pledge to try to make permanent the tax cuts he won in his first term — despite the widening federal budget deficit — could be a negative for some financial services companies.
‘‘I think it would have been more positive for financial services stocks if Kerry had won,’’ said Val Colasanto, assistant portfolio manager at Appleton Partners in Boston. ‘‘He would have been more likely to address some of the budget deficit issues we have, which would have had more favorable long-term interest rate impact.’’
The higher rates likely to result from high deficits ‘‘would hurt fixed-income markets and be a drag on equity markets over time,’’ Colasanto said.