DETROIT — George Bush was elected President of the United States largely on a platform of more of the same.
Consequently, analysts expect Bush to cautiously attempt to continue the growth that marked the Reagan era, but they don't see broad policy shifts that in themselves could dramatically alter prospects for most industries or stock market investors. Still, as the Bush era begins next year, some industries clearly will get more help than others.
The industry likely to see the greatest letdown in the coming years will be defense, observers agree. After defense's glory days under Ronald Reagan, the budget constraints facing Bush and Congress probably will require cutbacks in defense spending, or at least a severe reduction in the rate of growth in the Pentagon's budget.
"My own gut feeling is that it would be optimistic to see any real growth--after inflation--in the defense budget," said Don Spindel, defense analyst with the investment firm of A. G. Edwards & Sons in St. Louis. "I think it is more likely that we will see defense spending growth that is under the rate of inflation."
While Michael S. Dukakis probably would have taken a sharper knife to the defense budget than Bush, analysts don't believe that money will be available to fund many major new defense initiatives under the Republicans. That will mean leaner times in the future for aircraft, missile and ship makers, though large weapons systems already in production are unlikely to be severely hurt. Large contracts could also be stretched out, allowing some programs to survive with lower up-front costs to the Pentagon.
Strategic programs, such as the so-called Star Wars missile defense system, could be curtailed as well, warned Spindel. Thus, companies that rely more on strategic programs than conventional weapons systems may face the most disappointment in the coming years, while companies such as giant General Dynamics, that are well diversified in land, sea and air conventional weapons programs, should fare relatively well.
Some economists say that non-defense manufacturing firms are unlikely to enjoy much more growth because of the limited capacity left in American factories. But others maintain that these companies should continue to do well, thanks to the continued slide in the value of the dollar, which makes American products less expensive overseas.
Despite Bush's attempts to stabilize the securities and foreign exchange markets immediately after the election with hints that he would back ongoing efforts to curb the dollar's fall, the currency is unlikely to gain much ground unless Bush and Congress mount a dramatic attack on the federal deficit. And that seems unlikely; Bush has already ruled out an early budget "summit" with congressional leaders.
So Jill Thompson, a senior economist with DRI-McGraw Hill, a Lexington, Mass., forecasting firm, said she expected a continuing export boom, benefiting makers of heavy machinery, precision instruments, medical technology, commercial aircraft, computer-related products and fabricated metals. By that logic, look for Caterpillar Tractor, Boeing, General Electric, IBM and other traditional exporters to turn in solid performances.
Strength in exports would fuel growth in capital spending by manufacturers, while also helping sectors such as steel that supply materials. In addition, Bush pledged near the end of his campaign to extend steel import quotas beyond 1989. As a result, the nation's steel makers, including Bethlehem, Inland and USX, already enjoying a strong revival, figure to see good times again next year.
On the other hand, a slowdown in consumer spending, due to the growth in consumer debt and an expected rise in interest rates over the next six months, is likely to dampen domestic demand for consumer goods. "I think spending on consumer goods will only rise about 1% next year," Thompson said.
The child-care industry stands to boom, however. Both Bush and Dukakis advanced proposals to help working parents, and Bush's proposed child-care tax credit could boost an already surging industry. The outlook for the health-care industry, however, remains uncertain, since Bush has not made it clear how far he will go to protect health-related entitlement programs from the budget ax.