Source: LOHAS Weekly Newsletter
Published: Wednesday, November 01, 2000

The stock market's biggest dislike is uncertainty. Uncertainty of any kind leaves investors with no choice but to prepare for the worst-case scenario. The polls in the past two months have turned from what seemed like near certainty to a coin toss. As we go to press, George W. Bush is leading by several percentage points in almost every poll. One thing we can say for sure is the market will breathe a sigh of relief when the election season is over.

To make matters far worse, however, the Middle East has erupted yet again into a cycle of violence. With this comes heightened concerns about the prospect of a broader and protracted war. Of course, the real concern for investors is the impact heightened hostilities in the Middle East would have on world oil supplies and prices. Higher fuel prices have already begun to slow our current, record-breaking economic expansion. Surely further pressure would bring an end to these good times.

It is my contention that the Middle East will not erupt into a full-scale conflict. But more important—from the oil perspective—is that steps have been taken by the Organization of Petroleum Exporting Countries (OPEC) to step up production and keep oil prices down, with a mid-$20 price
target for a barrel of crude oil. This should help bring some stability to production levels and prices.

Over the past two months the market has skidded significantly with the broader market indices being hit hard. The Healthy Lifestyles stocks in the Natural Business LOHAS Journal Stock Index are now down an average of 30 percent year-to-date (see chart, below). The group was down
11 percent year-to-date just two months ago. On the good side, the Sustainable Economy stocks have continued to provide a major area of strength, with the group up an average of 36 percent year-to-date despite the down market. Overall, the LOHAS Journal Index closed this most recent period up 5.4 percent year-to-date vs. a 7.1 percent increase two months ago.

The biggest winners remain the Emerging Energy stocks: Astropower (APWR), Ballard (BLDP), Fuel Cell (FCEL) and SatCon Technology (SATC) have all posted huge year-to-date gains with each of them having more than tripled over the past nine months.

We had previously thought that a Bush election would necessarily be a negative for many of the components of the LOHAS Journal Index. But as the election approaches and the candidates' promises begin to blur, Bush spoke in the state of Washington touting tax incentives for installing solar energy systems on the rooftops of homes. This came just two weeks after he publicly mocked Gore in Pennsylvania for the same proposal. The lesson here is that it is politically incorrect to campaign against solar energy.

The LOHAS group of companies are catering to some broad demographic and pyschographic shifts happening in America. What this election has taught us is that no one is going to stop this trend. Politicians ultimately will get on board or be pummeled at the polls. For perhaps the first time, the 50 million Cultural Creatives are affecting politics and policies in this country, and they are having this impact on both of the major parties. At this point, even the Republican Party now knows that it needs to pay attention to this growing and increasingly vocal group of voters.

Matthew Patsky is a managing director at the Boston-based investment banking firm, Adams, Harkness & Hill.