Another day, another poll, or so it seems, as we count down the final month until the November presidential election. As much as polls make the news these days, they can also wear you down, as the vagaries and flaws of each particular survey add up to one heaping dose of inconclusive, political overkill.
But what if there were a different way to assess the likely outcome of the election? One using the markets as a measure to see where people are actually putting their money?
That's exactly what Jeff Kleintop, chief market strategist at LPL Financial, has been tracking all year long by way of contrasting the performance of 16 different industry groups — eight that are perceived to be beneficiaries if President Obama is re-elected, and eight that would likely do better under Republican rule.
"Lately, the elections are becoming a more dominant theme in the markets," Kleintop says in the attached video. "But they are also being priced in."
Before revealing the findings, let's review the industries as listed in the chart below.
While it seems logical that Health Care-related industries prefer Democrats given Obama's advocacy of the Affordable Care Act (better known as Obamacare), Kleintop explains that the incumbency case for Food & Staples Retailing is tied to the fact that the Walmarts of the world "tend to do better with a lower income demographic."
On the flip side, Republican support for more offshore drilling as well as a less hostile stance toward banking regulation make those sectors obvious inclusions in the partisan poll. But if you take something like Electric Utilities, Kleintop says it lands in the right-hand column for two reasons: less regulation and pledges to cut taxes on dividends, a key concern of utility investors.
So now the results. As the chart shows below, there is a "pretty strong showing for the Democrats," with noticeable run-up in June, following the Obamacare ruling from the Supreme Court, and in early September, when home builders lead the market.
From Kleintop's viewpoint, the most interesting aspect of the poll is that it suggests that the market is "expecting a pretty quick resolution" of the uncertainty surrounding the fiscal cliff in the lame duck session. "Investors may recognize in the fourth quarter that if you look back to 2011" and the debt ceiling showdown, you'll see it led to a credit rating downgrade and a 13% decline in stocks.
Like all polls, his is also meant to be taken with a grain of salt. The difference is that it uses real money and real-time performance of a select group of stocks.
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