What Obama Victory Means For Stocks

Even the ever conservative Wall Street Journal conceded yesterday that an Obama win would be good for stocks:

“Another four years under President Barack Obama may not be such a bad thing for the stock market.

No matter your beliefs, the Dow is up more than 50% since Obama took office during the depths of the financial crisis. Only three other presidents elected since 1900 — Franklin Roosevelt, Dwight Eisenhower and Bill Clinton – have experienced similar market returns.”

The Fiscal Cliff: The WSJ notes that this is a “wild card” with the greatest concern being that House Republicans have “refused to back any revenue increases”.

Likely outcome: Expect volatility to increase through year-end and into 2013.

The Fed: Fed Chairman Ben Bernanke’s term expires in 2014 and Obama is more likely to influence Bernanake to stay than Mitt Romney.

Likely outcome: Good for so-called risky assets, like stocks. Bad for the dollar.

Taxes: Obama has argued for tax increases on the wealthy in part to increase federal spending on education and alternative energy resources while Romney has pushed for cutting taxes for the uber-rich and decreasing regulations. For investors, both dividend and capital gains taxes are expected to head higher under four more years of Obama when compared to a potential Romney presidency.

Likely outcome: Bad for stocks, at least in the short term.

Historical Trends: In spite of Wall Street’s preference for Republican candidates, historically the stock market does better under Democratic administrations.

Since 1900, the Dow has averaged a 7.8% annual gain under Democratic presidents, compared with a 3% annual gain under Republicans, WSJ reported earlier this year and the Dow is up more than 7% this year, on pace for a fourth straight year of gains.

Likely outcome: It’s hard to ignore with history; win for stocks.

Sectors: Half of the S&P 500′s 10 large-cap sectors have outperformed the broad market since Obama took office with discretionary stocks in the lead followed by telecommunications, industrials, healthcare and technology.

Likely outcome: Health care and hospital stocks would likely benefit under four more years of Obama as health care reforms are likely to be preserved. Stocks of high-end retailers may suffer because of expectations of higher taxes on the wealthy.

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