What Happened to the investor class?

The pounding of the U.S. economy and stock markets seems to have shaken the support of key "investor class" voters for the Republican Presidential nominee, Arizona Senator John McCain.

In a nationwide telephone poll of 1,208 people taken from Oct. 26-30 by Reuters/C-SPAN/Zogby, McCain edged the Democratic nominee, Illinois Senator Barack Obama, among those who identified themselves as "investors" by 50.4% to 43.8%, with 5.8% "not sure." That was down sharply from a 15-point lead for McCain in a similar poll taken a month earlier. (Among non-investors, Obama led 56% to 36.1% in the most recent survey.)

"[The data] underscores more than anything else how much the financial crisis hurt McCain," says John Zogby, founder of the Utica (N.Y.)-based polling firm Zogby International. "In response to the crisis, McCain was erratic, frantic, and misspoken."

A Building Block for Bush

The good news for McCain? He seems to have recovered a bit since the darkest days of the financial crisis. A poll taken on Oct. 21, while stocks were at their most volatile, had him tied with Obama among investors.

Clearly, the investor class—which many pollsters define as those who have more than $5,000 invested in the stock market—is critical to a McCain victory. About 35% of voters belong to that group, and it was a key building block of George W. Bush's two victories, especially in 2004, when Bush won the support of investors by a wide margin over Democrat John Kerry. "If McCain doesn't win it—and win it big—he loses the election," says Zogby.

Candidates on both the Republican and Democrat sides aimed their pitches at this group early on, whether it was McCain's vow to maintain the Bush tax cuts or Senator Hillary Clinton (D-N.Y.) and Obama's promise to limit capital-gains tax increases. In February, BusinessWeek revisited some of the investor-class voters (BusinessWeek, 2/14/08) we profiled in September 2004. We found they had done well in the intervening years but were just beginning to feel the pinch of the downturn in home prices and economic growth.

No Great Faith in Either Candidate

McCain's recent recovery may reflect his pounding at Obama over tax plans. He altered his tax plan on Oct. 31, saying for the first time that he would like to slash capital-gains taxes in half on a permanent basis, and not just for the next two years, as he'd previously promised.

Pat Consolmagno, an 87-year-old retiree in Englewood, Fla., seems typical of those investors who are sticking with McCain. She voted for Bush in 2004 and is adamantly backing the Republican candidate this cycle. Consolmagno and her 90-year-old husband, Joe, live off the roughly $80,000 they get from earnings on their mutual funds and savings, Social Security, and a Chrysler pension. She says their investments "are not worth what they were." But she doesn't believe the financial meltdown is the fault of one political party, and doesn't trust Obama to solve the problems.

"Obama? I don't think he's got a clue," she says. "I don't think either [candidate] is a genius when it comes to the markets; we're just sitting here waiting to see what happens."

Skepticism of Republicans

McCain seemed to have a strong hold on investors' loyalty early in the fall, as he promoted his "maverick" image and tried to distance himself from Bush. But after the implosion of AIG (AIG) and Lehman Brothers, and the ensuing debate about a Wall Street bailout, McCain's lead began to shrink.

Investors in general have been more skeptical of the Republican Party (BusinessWeek, 4/24/06) since 2006. At that time, investors polled by Zogby expressed uneasiness with President Bush's handling of Hurricane Katrina, the Iraq war, and the deficit. While Bush received the votes of 61% of investors in 2004, he had slid to a 43% job-approval rating by 2006, according to Zogby.

"The Republican Party brand has clearly been hurt," says Dan Clifton, a Washington-based analyst with Strategas Research Partners, a New York investment research firm. Clifton points out that as the financial crisis hit in earnest at the end of September, McCain's luck began to change.

"Obama stood up with American flags and economic advisers saying, 'I know you are hurting. Help is on the way,'" says Clifton. "He offered solace and guidance while McCain offered confusion."