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Checking In with the Investor Class


We went back to a group of voters BusinessWeek profiled four years ago to see which Presidential candidates are speaking to their concerns

With the U.S. economy souring and stock markets down, where are voters in the so-called investor class turning?

American voters who identify themselves as investors—those who own stocks and bonds directly or invest in them through 401(k)s, mutual funds, or other accounts—have been a key bloc in recent elections. Their backing was critical to both of President George W. Bush's victories, and their shift away from the Republican Party in 2006 helped put Congress back in Democratic hands. The same holds true now, says Daniel Clifton, a Washington policy analyst with Strategas Research Partners. "Whichever way they move in the general election, that will sway the vote."

Today the investor class accounts for roughly a third of the electorate. It's a diverse lot, including everyone from union members and suburban environmentalists to a growing number of African Americans and Hispanics. Still, within each group, investor-class voters lean toward Republicans, says independent pollster John Zogby. Union members who own shares back GOP candidates more often than their peers who don't, for example.

Candidates from both parties, of course, are trying to draw investors in. They're a key reason John McCain and most of his former Republican rivals pledged to maintain the Bush tax cuts—and an equally important reason Hillary Clinton and Barack Obama say they'll limit increases in capital-gains taxes to top earners.

To see how well each candidate is doing with investors, BusinessWeek went back to a group of investor-class voters we profiled in September, 2004, just before the last Presidential election. By and large they have done well, as have many American investors, but the economy's current woes present new hurdles.

MARRIED, WITH BABIES

Witness Peter S. Blasi, a 33-year-old lawyer living outside St. Louis with his wife, Tami, and three young kids: 4-year-old Marie, 21-month-old Andrew, and Maggie, who arrived in September. Blasi represents one of the biggest segments of investor-class voters: married parents with children at home. For many of these typical suburb-dwellers, the scramble to build up savings while the cost of housing, health care, and other expenses keeps rising is among their biggest financial challenges. Even as Blasi continued to max out contributions to his 401(k) and opened college savings accounts for his kids, he paid $439,000 for a bigger house last August. But in the troubled housing market, he has been unable to sell his old home. So far he hasn't lost money. Having paid $190,000 for it in 2002, he's notched his asking price down, from $230,000 to $224,900. Yet the strain of keeping up $3,000 in total monthly mortgage payments is starting to show. "It's sustainable—for now," he says. "But I'd like to get the money out and put it into something else."

Soaring health-care costs are also a big issue for Blasi, a Bush supporter in 2004. The premiums paid by his 15-person law firm have more than doubled in six years. Last year they jumped $25,000. But he worries about the tax hikes the Democrats could propose to pay for any expansive new health programs. "I'm more receptive to private market reforms as a solution rather than a mandated program forced by the government. But I do think there will be a role for both," says Blasi, who considers himself a fiscally conservative independent. While he has backed candidates of both parties before, that fiscal conservatism is a crucial reason he's for McCain this year. He's also impressed with McCain's ability to work with both sides on stalemated problems like immigration. "I think he's more open to finding nontraditional avenues than most Republicans," says Blasi. "We're entering a phase where that kind of flexibility is needed."

TUITION WORRIES

Blasi's situation is similar to that of Duane Ewing, a software-marketing manager who lives in Katy, Tex., a Houston suburb popular with oil and gas executives. Investor-class African American voters, like their white and Hispanic counterparts, are more likely to go with the GOP than their noninvestor peers. But while Ewing cheerfully concedes that he has benefited hugely from the Bush tax cuts—"I hope nobody messes with the capital-gains rates," he says—and he hasn't ruled out McCain entirely, his vote will probably go to a Democrat.

Ewing, who went for Kerry in 2004, currently is torn between Clinton and Obama. With a 16-year-old daughter racking up straight As, Ewing's biggest financial worry is the cost of college. "My No. 1, No. 2, and No. 3 priorities right now are putting enough away for education," he says. The Oberlin College graduate laments that it costs around $45,000 a year to attend a top school today, four times as much as when he was a student, and that only limited financial aid exists for upper-middle-class families like his. He lauds Clinton for being the first of the main candidates to come out with tangible plans to help (she supports a $3,500 tuition tax credit). "She seems to be talking more about programs that would help people like myself," he says. But he also thinks the government needs to do more to improve access to health care. On that, he prefers Obama's less heavy-handed approach. And although he likes McCain, Ewing worries he'd continue pouring too much into Iraq. "We can't do everything; we're spending $300 billion a year on a war with little to show for it," he says. "The Democrats' priorities are more in line with mine."

Spending is a big issue, too, for Pat Consolmagno, an 86-year-old retiree in Englewood, Fla., who voted for Bush in the last election. She and her 89-year-old husband, Joe, live off the roughly $80,000 a year they get from earnings on their mutual funds and savings, Social Security, and a Chrysler pension. So far their dividends have remained steady despite a 10% drop in their stock portfolio, but they know that may not last. And with prices up on everything from food to gas, she's budgeting more. "We're concerned about what's going on, but if we don't have the money, we won't spend it," she says, adding that they will watch their credit-card bills and put off major repairs if their income falls.

The Consolmagnos' fiscal prudence also extends to the home they've owned for over 30 years. Its value has more than tripled—but despite repeated offers from mortgage brokers, they never pulled equity out. Nearby, however, the mortgage crisis is in full swing, with many houses for rent or in foreclosure. Pat, a Depression-era child who has always lived a "very modest life," doesn't understand how so many have gotten into such a situation. "If you've only got so much and you buy a house for a ridiculous amount, how do you think it's going to add up?" she asks. She doesn't agree with proposals from the Presidential candidates or others to bail out struggling homeowners. "Frankly, I don't think taxpayers have any obligation to help them out," she says.

CONSERVATIVE SENIORS

With views such as those, it's little surprise that Consolmagno, like the largest share of senior investors, leans toward the GOP. Seniors without money in the market skew much more heavily Democratic. Consolmagno is not interested in a host of government programs to resolve current travails in the economy, health care, or elsewhere. "You're up a creek if you depend on the government to take care of everything," she says. And this year she backs McCain, both for his fiscal conservatism and for her sense that when he takes a stand, he sticks with it. "I've never before been convinced of a candidate so early; I really do like McCain," she says. "I don't expect him to work miracles on the economy or other issues, but I do have faith in his judgment."

In his Manhattan apartment 1,200 miles to the north, Scott Berrie is an entirely different sort of investor-class voter. He represents upscale urban investors—a highly educated, high-income group of social liberals. They tend to lean Democratic in higher numbers than other investors, and Berrie is no exception: He supported Kerry in the last election. An entrepreneur who sold his eyewear business last July, he's doing well financially; while his current portfolio is off some 5% to 10%, he figures he'll find good buys in the market when he receives the final proceeds from the sale soon. As he considers his next move, one big concern is that a recession could make it harder for a new venture to attract financing or get off the ground. "I'm an entrepreneur: I worry about fewer dollars being available for investment, as well as the number of dollars going out rather than coming in."

He's also impatient for what he considers the disastrous Bush Administration to end. The next President, he believes, will face a tough job revitalizing the economy and restoring America's standing in the world. "It's like when you've been in a terrible wreck, and you're waiting for the healing to start," he says. As for the candidate best placed to tackle those challenges? For Berrie, it's Clinton all the way. "I'd like to see Obama as President some day, but I think Hillary has more skill and experience at navigating the difficult aspects of government," he says. "Right now, she would be better."

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Investor Votes by the Numbers

It's too early to tell yet whether investor-class voters will opt for probable Republican candidate John McCain or whichever of his Democratic rivals emerges, but within each party, the preferences are clear. In a January survey of likely voters by pollster Zogby International, 42.5% of Democrats identified as investors backed Barack Obama, compared with 35.7% for Hillary Clinton. The former First Lady does much better with noninvestors, beating Obama 40.3% to 34.8%. Support from shareholders in the GOP also helps explain why John McCain vanquished Mitt Romney. Despite his business background, Romney garnered the support of just 15.4% of stakeholder voters, vs. McCain's 29.3%. Even populist Mike Huckabee, at 22.2%, did better among investors than did Romney.


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