Stocks are in an 'Obamacare rally'

The worse the rollout of the Affordable Care Act goes, the higher the market climbs, notes one analyst.

By MSN Money Partner Nov 15, 2013 3:08PM

Image: Stock market (© Digital Vision/SuperStock)By Jeff Cox, CNBC

Stocks in general and health care in particular are showing virtually no fear that the Affordable Healthcare Act's dismal debut may have more widespread repercussions.

In a perverse way, the current market's movement, with the Dow Jones industrials ($INDU) approaching 16,000 for the first time ever, could be called the "Obamacare rally."

That's the label Raymond James strategist Jeffrey Saut -- with tongue at least partly in cheek -- put on the market Friday in a note to clients:

I'm calling this the Obamacare rally because the worse the Obamacare roll-out gets, the higher the stock market goes! I don't know what the correlation factor is, but it certainly feels like that is the driver of this latest breakout to the upside for the S&P 500.

Market psychology certainly has been hard to divine as the major indexes soar to record highs. Friday's early rally, for instance, came against deflationary U.S. signs in the form of declining import and export prices, as well as overnight news showing at least a hiccup in the European recovery story.

Saut thinks the latest run could be a little reverse psychology and maybe a little voodoo.

Indeed, it isn't the economic numbers, a decline in interest rates, earnings reports, revenue reports, or more cooperation inside the D.C. Beltway; so, it has to be Obamacare and the belief that it is so bad there is going to be a change. Change you can believe in! It kind of reminds me of 2008 when I was stating that, "The whiter Ben Bernanke's beard gets, the more trouble the entire financial fabric of this country gets."

There are tangible signs, though, that investors remain confident.

The latest Investors Intelligence survey showed the bulls still firmly in control among newsletter editors, with a 52.6 percent to 15.5 percent advantage over market pessimists. 

Mutual funds -- generally considered the purview of retail investors -- saw a net inflow of $1.7 billion to stock-based offerings, according to Thomson Reuters.

In the specific area of health care, the SPDR Health Care Select Sector exchange-traded fund (XLV) has raked in $300 million during the tumultuous November for Obamacare, according to IndexUniverse. The fund has gained 2.3 percent over the past month and is up 42.2 percent over the past year.

Sault thinks there would be some danger lurking for the market, but sees opportunity as well.

In the current euphoria, nothing seems to matter. If the equity markets are able to ignore the natural timing elements for a pause/pullback, the Federal Reserve and the lure of a solution to Obamacare will have overpowered what should have occurred. Nevertheless, I adhere to the quote from Pericles, "The key is not to predict the future, but to prepare for it." Still, any pullback represents a buying opportunity in what I believe is an ongoing primary uptrend.

More from CNBC
Nov 15, 2013 3:46PM
What do you expect from MSN. Nothing Obama supports is wrong. Its the Republicans fault.
Nov 15, 2013 3:57PM
The U.S. Post Office just lost 5 Billion,  but Oblamer-care will be profitable?
Nov 15, 2013 3:19PM
With the Democrat-Media Complex, even when Obama screws up, it's great for us! Yay!
Nov 15, 2013 3:49PM
 Enough lies you sick loser media. THE MARKETS ARE ON WELFARE FROM THE FED PERIOD. Lowest labor participation rate since 1978 enormous government debt. This is your Obozo recovery a complete fraud and that is expected when the most corrupted scum ever elected is in office. You stupid Americans better wake up your turning into a 3rd world turd! All it took was a generation of morons called baby boomers and a party of evil called democrats.
Nov 15, 2013 3:30PM
I would guess the market has been up because of the testimony of the next Fed president, Janet Yellen.  But then again, I'm not a deep-thinking "strategist."
Nov 15, 2013 3:31PM

ObamaScare = a disaster; the economy = a disaster.  Wall Street = highest in history.  I guess there is logic out there although I certainly can not find it. 

Nov 15, 2013 4:01PM
I'm thinking that business are hoping that Obamacare will be cancelled.  Business will return to normal, and hiring full time employees will resume. The worse Obamacare looks, the better business before Obama looks.
Nov 15, 2013 4:22PM
Maybe Obummer will invite a group of people recently dropped by their insurance companies to stand behind him on the stage while he signs the Republican bill to fix his lie.
Nov 15, 2013 4:14PM
And MSNBC is still supporting Obama. What is the payoff from Obama?????? 
Nov 15, 2013 4:36PM

4) Obamacare will create jobs. That would be true if you added " the IRS" to the end of it, but companies .

Retailers are cutting worker hours at a rate not seen in more than three decades — a sudden shift that can only be explained by the onset of ObamaCare’s employer mandates.

Nonsupervisory employees logged an average 30.0 hours per week in April, the shortest retail workweek since early 2010, Labor Department data out Friday show.

…This reversal doesn’t appear related to the economy, which has been consistently mediocre. Instead, all evidence points to the coming launch of ObamaCare, which the retail industry has warned would cause just such a result.

...One way for employers to minimize the costs of providing “affordable” coverage to modest-wage workers is to shift more work to part-time, defined as less than 30 hours per week under ObamaCare.

So not only are they going to get crummy health care, they're getting their hours cut back, too. Thanks, Obama!

Nov 15, 2013 4:36PM

3) "If you like your doctor, you will be able to keep your doctor. Period." Soon, .

Eighty-three percent of American physicians have considered leaving their practices over President Barack Obama’s health care reform law, according to a survey released by the Doctor Patient Medical Association.

The DPMA, a non-partisan association of doctors and patients, surveyed a random selection of 699 doctors nationwide. The survey found that the majority have thought about bailing out of their careers over the legislation, which was upheld last month by the Supreme Court.

Even if doctors do not quit their jobs over the ruling, America will face a shortage of at least 90,000 doctors by 2020. The new health care law increases demand for physicians by expanding insurance coverage. This change will exacerbate the current shortage as more Americans live past 65.

What good is health care, even the bad health care we'll get through Obamacare, if you can't find a doctor to see you when you're sick?

Nov 15, 2013 4:24PM
Come-on MSN are you people really that stupid?
Nov 15, 2013 4:34PM

1) Obamacare will cut the cost of your health care. If only. When Obamacare goes into effect next year, many Americans .

President Obama (promised)...that the cost of insurance would go down “by $2,500 per family per year.” ...In fact, the average 25 and 40-year-old will pay double under Obamacare what they would need to pay today, based on rates posted at (NASDAQ:EHTH). More specifically, for the typical 25-year-old male non-smoker, the average Obamacare “bronze” exchange plan in California will cost between 64 and 117 percent more than the cheapest five plans on eHealth. For 40-year-old male non-smokers, it’s between 73 and 146 percent more.

2) Obamacare will not increase the deficit. Calling for a massive new government program to cut costs is sort of like moving to Death Valley for the reduced air conditioning bills. Alas, .

Obamacare will increase the long-term federal deficit by $6.2 trillion, according to a Government Accountability Office (GAO) report released today.

Senator Jeff Sessions (R., Ala.), who requested the report, revealed the findings this morning at a Senate Budget Committee hearing. The report, he said, “confirms everything critics and Republicans were saying about the faults of this bill,” and “dramatically proves that the promises made assuring the nation that the largest new entitlement program in history would not add one dime to the deficit were false.”

President Obama and other Democrats attempted to win support for the health-care bill by touting it as a fiscally responsible enterprise. “I will not sign a plan that adds one dime to our deficits — either now or in the future,” Obama told a joint-session of Congress in September 2009. “I will not sign it if it adds one dime to the deficit, now or in the future, period.”

Nov 15, 2013 3:50PM
These leeches make me want to throw up
Nov 15, 2013 4:38PM

New health insurance rules under ObamaCare could lead to a host of personal insurance plans being canceled as early as this fall, a scenario expected to cause consumer confusion.

Under the federal overhaul, those policies that cannot meet new insurance plan standards may be discontinued. This means individuals, and some small businesses, that rely on those plans will have to find new ones.

The goal is to ensure that most insurance policies offer a basic set of coverage, as part of the Obama administration's plan to cover most of the nation's 50 million uninsured.

Yet it also seems to run afoul of one of the president's best-known promises on the law: "If you like your health care plan, you'll be able to keep your health care plan."

In fact, state insurance commissioners largely are giving insurers the option of canceling existing plans or changing them to comply with new federal requirements. Large employer plans that cover most workers and their families are unlikely to be affected.

The National Association of Insurance Commissioners says it is hearing that many carriers will cancel policies and issue new ones because administratively that is easier than changing existing plans.

..."You're going to be forcibly upgraded," said Bob Laszewski, a health care industry consultant. "It's like showing up at the airline counter and being told, 'You have no choice, $300 please. You're getting a first-class ticket, why are you complaining?'"

Nov 15, 2013 4:37PM

5) If you like your health care plan, you'll be able to keep it. According to Obama, even though the government is about to come crashing into the health care market like a Blue Whale bellyflopping into a pond, it isn't going to have any impact at all on the insurance companies that were already swimming along. Why, if you like your own insurance, then there is nothing to worry about because you can keep it.
Nov 15, 2013 4:25PM

"The worse the rollout of the Affordable Care Act goes, the higher the market climbs"


Which just kinda' proves that fundamentals have gone out the window. The market should be shaking in its boots over this debacle.

Nov 15, 2013 4:48PM
This rally is all about the Fed wasting $85 billion a month as it puts liquidity into the stock market.  This action has also now has put an additional $3.6 trillion debt onto the balance sheets of the Federal Reserve... which otherwise would be part of our already crazy $17.13 Trillion national debt.  Once sanity returns to the Fed, the Dow will drop by 20%.  This drop will bring the Dow's P/E ratio in line with the historical average... as it always returns to very near this average over time.
Nov 15, 2013 4:31PM
Hey Beav........... if Obummer ask nicely maybe those folks will sing "dear leader" as he signs the Republican bill to fix the problems caused by his lies.
Nov 15, 2013 4:12PM
They wouldn't let ya in here if you weren't a chump.       .........Henry Gondorf
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[BRIEFING.COM] The major averages ended the midweek session with slim gains after showing some intraday volatility in reaction to the release of the latest policy directive from the Federal Open Market Committee. The S&P 500 added 0.1%, while the relative strength among small caps sent the Russell 2000 higher by 0.3%.

Equities spent the first half of the session near their flat lines as participants stuck to the sidelines ahead of the FOMC statement, which conveyed no changes to the ... More


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