Under performing sectors are the ones that will be most affected by expected new policies
Same political players increases pessimism that there will be bipartisanship
If the market expected that Romney would be better for business then certainty in results should reflect new price
Obama win worse for business in general, but certain companies will benefit and perverse ZIRP policy more likely to continue as artificial inflator
Upcoming increase in capital gains tax leading to people dumping stocks
The Fiscal Cliff and Europe Are A One/Two Punch
No links on the No side have been added yet
Jason Nov 07, 2012
Obama is for Dodd-Frank legislation affecting the financial sector and increasing restrictions on coal power generation. Both bank stocks and coal producer stocks are materially underperforming the market today. The financial sector ETF (XLF) is down 2.7% while the coal ETF (KOL) is 5.5% lower.
Luis Perez Nov 07, 2012
That is correct, the fact that the sectors that will be most affected by the new administration are the ones under performing is a good indicator that the election results are indeed having an effect on the stock market today.
Justin Kruger Nov 07, 2012
I think if anyone was going to sell, they would sell for profits now, and then sell for losses after the tax change. I think it would have a better effect on ones basis if you sell a loss after the tax change. So, if this is true then under performing stocks might not be affected now, but might be affected at some later point, say december 2013.
With the upcoming increase in capital gains coming at the end of the year, many investors are dumping their positions with long-term gains in order to reduce their tax liability.
The market is just now dealing with the reality that they now need to take their gains while they have them. We should see a bit more of this before the new tax rate kicks in. After that eclipses, then trading should return to normal.
Jimmy Nov 07, 2012
Post election, all the political players (president, senate, house) are the same and so there is pessimism we will see the bipartisanship necessary to avoid or have a good long term solution for the fiscal cliff.
For many of the outgoing members of congress now is a good time to vote without concern of being reinstated, they can vote in accord with their own thoughts free of super pac threats.
If the market shared the view that electing Romney would be better for earnings of listed companies, and even if most expected Obama to win with say 70% certainty, once it becomes a certainty then the market should correct itself.
Jon Adler Nov 08, 2012
J Womack Nov 09, 2012
From early in the morning on Election Day as the news reported, the voter turnout was very high. In PA, a battleground state, at 10 a.m. former Governor Ed Rendell reported that turnout thus far was higher than it had been the previous year. Intrade had an Obama win priced at 68% and it was inching up throughout the day.
No one who pays attention to price signals thought Romney was going to win this campaign. Since it's launch, Intrade has been perfect and once again clearly signaled that Obama would win the election. So what happened?
1) The Fiscal Cliff - Obama ran on letting the Bush tax cuts expire. John Boehner announced that the Republicans in the House would NOT consider ANY tax increases. The market priced in increased volatility - if the govt can't get its stuff together the market will force them to. Consider the day after the election the first shot across the bow?
2) Weakness in Europe - it was announced that Europe was probably going to have flat growth in 2013 with a rebound pushed out to 2014. If you had priced in any amount of growth in Europe, you immediately repriced that risk. With Europe as the US' number one trading partner, this was a real negative.
As much as some would like to make the case this was about Obama, it wasn't. It was about expectations.
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