THE verdict of the Dow Jones industrial average is in, and it
          says Al Gore is headed for the White House.

          The Dow closed yesterday at
          10,971.14, up 4.3 percent since
          the end of July after a roller
          coaster period that saw it soar
          during August and then sink in
          September and early October,
          only to put on a strong rally in the
          final two weeks of the month.

          The Dow's verdict flies in the face
          of the conventional wisdom of the
          polls, which show George W.
          Bush with a narrow lead. But the
          Dow's record of presidential
          election forecasting is such an
          excellent one that it commands
          respect. It has correctly forecast
          22 of the 25 presidential elections
          since the Dow industrials made
          their debut in 1897.

          The historical pattern is that when
          the Dow rises from the end of July
          through the end of October — the
          period when the attention of voters
          is becoming most fixed on the
          presidential election, the incumbent
          party keeps the White House. But
          when the Dow goes down, the
          insiders are thrown out.

          This year the Dow has seemed to
          be a leading indicator of the polls,
          at least of the most widely
          followed tracking poll, the
          CNN-USA Today Gallup poll. In
          early August, just after the stock
          market began its August rally, Mr.
          Bush enjoyed a 17- point lead.
          That soon began shrinking, and by
          Sept. 6, a few days after the market's summer high was reached, Mr.
          Gore held a 3-point lead. That widened to a 10-point gap, Mr. Gore's
          biggest in the poll this year, on Sept. 20. By then, however, the rally had
          petered out, and the market had come down a bit.

          The Dow fell sharply through Oct. 18, and by then Mr. Bush was back
          to a 10-point lead in the polls. That lead then evaporated by Oct. 23,
          while the stock market was rallying. But within a few days, even as the
          Dow continued to move up, Mr. Bush's lead reappeared, peaking at 13
          points on Oct. 26. But it has since been shrinking as the Dow rallied
          again, and the latest result gives Mr. Bush a three-point lead.

          The likeliest explanation for the Dow's success as an election indicator in
          the past is not that voters react to the stock market, but that both the
          market and the election are measures of how Americans feel about the
          future. A rising market indicates optimism, and such a good feeling can
          benefit the incumbent party.

          The most recent failure of the Dow as an election indicator came in 1968,
          a year that in some ways is similar to this one. Then, as now, the
          Democratic candidate was an incumbent vice president whose
          Republican opponent's last name had been on the ballot — and lost —
          eight years before. That election pitted Vice President Hubert Humphrey
          against Richard M. Nixon, who had lost the election in 1960. Now Mr.
          Gore is opposing the son of President George Bush, who was defeated
          in 1992.

          Perhaps more important, the country was in what was then the longest
          economic expansion in American history, a period of growth that would
          not end until late 1969. That expansion now ranks second, having been
          eclipsed by the current one that began in 1991. If Mr. Bush wins this
          year, perhaps it will be right to conclude that voters are less focused on
          the economy after a very long period of prosperity dulls the memory of
          recession.

          The other times that the Dow failed as a forecaster were in 1932 and
          1956. In 1932, a recovery in the Dow was tiny compared with the fall
          from the 1929 peaks and had no chance to restore Herbert Hoover's
          reputation or popularity. In 1956, Dwight D. Eisenhower cruised to re-
          election despite a dip in the Dow.

          On all those three failures of forecasting, the Dow did reverse itself in the
          couple of weeks before the end of October, rising in 1956 and falling in
          1932 and 1968 — a move that could be seen as qualifying the otherwise
          incorrect election forecast.

          This year, however, the last couple of weeks in October were strong
          ones for the Dow, and if Mr. Gore nonetheless loses, it would seem to
          indicate a clear failure for the Dow as an election indicator. Nor does the
          weakness of the Nasdaq provide a convincing contrary forecast. Even
          after yesterday's 5.6 percent rally, the Nasdaq composite is down 10.5
          percent since the end of July.

          Unfortunately for Republican hopes, the Nasdaq's record as a market
          forecaster is not very good. In the seven presidential elections since it
          began in 1971, the Nasdaq has correctly forecast just four of them. It
          rose in 1980 and 1992, when incumbents were nonetheless defeated,
          and fell in 1988, when the incumbent party kept the White House.