"Better the devil you know" the old saying goes. It's an adage that's particularly poignant in political circles today as investors have the unique requirement of voting twice. Once with their heart (at the actual ballot box) and then again with their heads as they position portfolios to reflect what they think will happen, not necessarily what they want to happen.
For Hank Smith, chief investment officer at Haverford Quality Investing, that conundrum has left him taking a contrarian stance. "There's tremendous consensus among investors that the market takes off in a Romney win," he says in the attached video,"and the market loves to confound consensus."
As he sees it, despite the former Massachusetts Governor's preferred stance on issues such as taxation and regulation, fundamentally, he says "a Romney win brings uncertainty" all on its own.
That's because it would not only usher in a new President, but the appointment of ''unknown advisers and leaders" to fill an entirely new cabinet would set off a secondary rush for answers and clues as to how these people might govern.
Even so, Smith says the "biggest uncertainty" of all will be how the "immediate transition" to address the fiscal cliff transpires. The good news here is if the trillion dollar hit from mandatory budget cuts and tax increases set to take effect January 1st is averted or delayed, "then I think we have a late, year end rally," says Smith.
The fate of Obamacare is often cited as another major area of change that will see polar reaction depending on the outcome of the election, when in fact, its destiny will be much more closely linked to the balance of power in the House and Senate versus winning the White House.
Smith also brings up the Romney pledge to "label China a currency manipulator" as a possible stumbling point for a market that prefers free trade".
But when it comes to the issue of setting the tax rate on dividends and not reappointing Federal Reserve Chairman Ben Bernanke, Smith is surprisingly calm, saying the former has proven not to effect stocks that much, while the latter, he expects will be a moot point since he doesn't think Bernanke even wants a third term.
- Politics & Government