A monitor displays a broadcast of President Barack Obama as a trader works on the floor of the New York Stock Exchange. © Bloomberg via Getty Images

The stock market loves President Barack Obama. With all its cheating heart, and all its mercenary soul.

More than that, actually -- it adores him. The love story of Wall Street and Obama is a bromance like no other, a man-crush for the ages.

Despite his threats to soak the wealthy for more taxes, despite Fed Chairman Ben Bernanke’s attack on savers, despite even his threat to kill special treatment for dividends, institutional investors have thrown themselves at Obama’s feet as they have not done in the first term of any president in the past century.

You could look it up. The Standard & Poor’s 500 Index ($INX) has gained 76% since his inauguration in January 2009, while the Nasdaq 100 Index ($NDX) is up 128%.

Compare that withthe S&P 500’s 13% decline and the Nasdaq 100's 45% wipeout in the first term of his predecessor, George W. Bush; or the mere 25% gain in the first term of conservative icon Ronald Reagan; or even the 60% gain in the halcyon early 1990s in the first term of Bill Clinton.

The staggering advance of the market is probably one of Obama’s greatest accomplishments, and yet, in a rich irony, political sensitivities prevent him from bragging about it.

The beautiful part is that this was not a coincidence, beginner’s luck or a historical fluke.

The administration and the Federal Reserve run by his appointed chairman, Bernanke, have systematically stuffed big banks’ pockets with cash in an unending rescue effort, slashed interest rates to the lowest levels of the past 300 years, diverted senior citizens’ savings to revive the moribund residential construction industry and showered drugmakers and insurers with fresh sources of revenue from his health care overhaul.

Little wonder then that Wall Street couldn’t bear the idea of parting ways with the Obama administration, and thus over the past two months threw an extended tantrum to protest the surprising advancement of GOP challenger Mitt Romney in the polls.

Now that the president has won a second term, you can expect most of the sectors that have benefited from the present administration to keep on rolling. Here are some top prospects:

Health care

The Patient Protection and Affordable Care Act, the president’s health care initiative, set out new mandates, subsidies and credits to employers and individuals to increase Americans’ access to health care. Upon its passage in March 2010, investors began boosting the shares of drugmakers, insurance providers and hospitals because they all suddenly had a lot more paying customers, courtesy of the government and taxpayers.

Shares of Pfizer (PFE), for example, had fallen 50% during the eight years of the Bush administration, January 2001 to January 2009. In contrast, its shares are up 70% during the Obama administration, almost in a straight line. Some 64% of the gains in the maker of Viagra, Zoloft and Lipitor have come since Obamacare passed.

Insurance provider UnitedHealth Group (UNH) is up 73% since Obamacare passed. Smaller biotechs have gained a lot more, led by Alexion Pharmaceuticals (ALXN), up 252%.

Overall, SPDR Health Care Select Sector  (XLV), exchange-traded fund, which includes all the health care stocks in the S&P 500, is up 31% since the president’s health-care law passed, versus 27% for the broad market.

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Home construction and real estate

The Obama administration and Federal Reserve targeted the homebuilding industry for special attention, because it is among the few industries that cannot outsource jobs overseas. The industry also provides the best income to workers without college educations and has a ripple effect on the economy, as new homes require paint, lumber, furniture, lawn care and the like.

The iShares Dow Jones US Home Construction (ITB) ETF offers the purest exposure to the industry. It’s up 133% during the Obama term so far, versus 69% for the S&P 500, and it’s still very strong. The best individual stocks include Lennar (LEN), PulteGroup (PHM), Louisiana Pacific (LPX), Eagle Materials (EXP) and M/I Homes (MHO) among the larger companies, as well as peripheral players like lawn-care machinery maker Toro (TTC), swimming pool supplier Pool (POOL) and carpet maker Mohawk Industries (MHK).

Likewise the real estate industry has benefited enormously from policy over the past four years, as quantitative easing has involved directly buying securities that support residential and commercial construction. The iShares Dow Jones US Real Estate (IYR) ETF includes all the major players, including regional shopping mall specialist Simon Properties (SPG), which is up a cool 315% since Obama entered the Oval Office and still looks fine. Two new stocks with promise in the red hot mortgage servicing business are Nationstar Mortgage (NSM) and Home Loan Servicing Solution (HLSS).

Mobile communications

The Obama administration has not promoted a coherent technology policy. But outside of a couple of attempts to rein in Google (GOOG), it has not willfully attacked the tech industry either. The group has risen 114% during the four years, led by the 675% blitzkrieg of Apple (AAPL) and 390% advance of Amazon.com (AMZN).

One subgroup in the industry that appears set for further improvement is the cellular tower owners. There are relatively few of them, and they get paid in part on a metered basis, so they are neutral parties that are prime beneficiaries of the explosion in mobile communications. Top names are SBA Communications (SBAC), American Tower (AMT) and Crown Castle International (CCI).

For a contrarian pick over the next four years, consider a bet on a surprise resurgence at Dell (DELL) or Hewlett-Packard (HPQ), which are clumsily trying to shed their personal computer legacies in favor of services, and may well find opportunities ahead.

And for the small caps, two companies with a shot at finding success in the patchwork new world that employers and hospitals will face in health care and the digitization of medical records, consider WageWorks (WAGE) and Greenway Medical Technologies (GWAY).

Financial services

Over the past four years, consumers have largely reined in their spending and streamlined their use of plastic, and that has actually benefited some of the nimbler companies in the credit and transaction businesses. Delinquencies have fallen dramatically, and the use of credit cards is actually up.

We can expect a second Obama administration would attempt to reinforce these trends, and that would improve the opportunities for the industry’s leaders.

Three companies to watch on this score are Capital One Financial (COF), Discover Financial Services (DFS) and MasterCard (MA). The last is the easiest call, as it will grow at a multiple of the growth of credit and debit transactions, and has largely escaped all attempts to rein in its profitability or ubiquity.


Energy producers have fared surprisingly well in the Obama years, led in part by the companies in the complex that were the most capable of staying one step ahead of the regulators and in part by the ones paying the largest dividends to yield-starved pensioners. Companies that sell chemicals into the energy market have also fared well, as margins have improved and Department of Environmental Protection rules have been surprisingly restrained.

Some of the best in the energy patch are Cabot Oil & Gas (COG), and high-yielding master-limited-partnerships Plains AllAmericanPipeline (PAA), Enterprise Products Partners (EPD), Kinder Morgan Energy Partners (KMP), Linn Energy (LINE) and refiner Calumet Specialty Products Partners (CLMT).

On the chemicals side of refining, look for continued success from NewMarket (NEU), W.R. Grace (GRA) and LyondellBasell Industries (LYB). The high-yield stocks issue new shares in secondaries fairly frequently, so wait until one of those 3% to 5% short-term setbacks to buy.

Overall, economic and political cycles suggest the first year of a second Obama aAdministration could be rough as investors adjust further to slowing global growth and peak earnings.

While the full second term is likely to turn out well for stocks, if you are nimble, you may wish to wait for at least one 15%-plus correction in mid-2013 to take on a full plate of risk.

A good analogy might be the second term for President Clinton. The entire four-year period yielded a very respectable 77% return for the S&P 500 and whopping 252% return for the tech-bubble Nasdaq 100. But the first two years were both marred by separate 10%-plus slides in the spring and winter.

Bottom line: Expect the market to continue its bromance with Obama in a second term, but buy into it opportunistically when panic is in the air.

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