Is Obama priced into the sell-off?
Shares sink after the president's re-election and the prospect of a nasty fight over the fiscal cliff. The market may be overreacting.
Stocks were getting crushed Wednesday as traders reacted to President Barack Obama's re-election and the upcoming fight over the fiscal cliff. Other factors weighing on sentiment include Wednesday night's Greek austerity vote and China's upcoming leadership transition. There was no election surprise for Romney, as I was quietly expecting.
Still, there are signs that Tuesday's strong rotation into key sector groups wasn't a one-off fluke.
Moreover, I'm looking for Obama to push for a pro-business, pro-Wall Street Treasury Secretary in the days to come as an easy way to bolster confidence.
I'm not alone in seeing the silver lining. Credit Suisse analysts told clients this morning that they believe that much of the negative tax impact from Obama (capital gains and dividend rates going up) has already been discounted and that now is the time to look for positive catalysts.
* Less risk of China trade escalation. Romney said he would name China a "currency manipulator" on day one of his presidency. Beijing, wary of the attention, pushed its currency to a 19-year high as a result of Romney's pledge. This risked retaliation that will now be avoided.
* More potential for fiscal cliff compromise. Credit Suisse believes Obama's win further limited the influence of the Tea Party (along with losses by Tea-Party backed Senate candidates for the GOP), making a grand bargain possible later in 2013 after the lame duck session of Congress postpones the fiscal cliff.
* Increase in infrastructure and education spending, which will help the long-term growth rate of the economy.
* Obama's proposed cut in the corporate tax rate to 28%.
* CEOs have already reacted to the fiscal cliff and could be prone to a positive surprise if a deal gets done. Financially, the corporate sector remains in great shape despite disappointing Q3 earnings. It's enjoying record free cash flow, low debt levels, the oldest capital base since records started in 1970 (so, very depreciated assets), and a near-record gap between return on assets and the cost of debt.
There are also other positives for the market. Inflation threatens to push higher as the Federal Reserve considers QE4 in December -- a monthly allowance of Treasury bond purchases to complement its $40 billion run rate of mortgage purchases under QE3 -- to replace the expiring "Operation Twist" program. Obama's reelection ensures the Fed stays stimulative at least into 2014.
And Athens looks set to approve its latest austerity budget tonight, which will unlock another round of bailout cash and possibly additional support from the European Central Bank.
No wonder I'm seeing early signs buyers are returning to precious metals stocks after leaving them out in the cold since September. In response, I'm adding Market Vector Junior Gold Miners (GDXJ) and Eldorado Gold (EGO) to the Edge Letter Sample Portfolio.
Disclosure: Anthony has recommended GDXJ and EGO to his clients.
Be sure to check out Anthony's new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at firstname.lastname@example.org and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.
We're going to progress out of this. It takes WORK. Not fake administrative work... REAL work like labor. Don't like it... relocate.
The voters will now see how bad it can get!
And Anthony...you added some more Gold Investments I see. Gold loves bad things, and it has been known as a forecaster of bad things and reacts to bad things.
It don't look good to me, buddy!
all of those who dumped thier holdings and now blaming President Obama for that are the same one
who will start buying tomorrow
My friends it is called GREED no more No Less
MARKET WAS NOT OVERREACTING -- MARKET WAS ILLEGALLY SHORT-SOLD AND THE PRESIDENT WILL BE LOOKING INTO THIS. SHORT-SELLING SHOULD BE ILLEGAL.
lots of talk below about retirement this and that. Romney stated he would eliminate federal employee matching funds to retirement and encourage the private sector to do the same. Romney said he would encourage all to do a high-5 years for retirement calculations instead of high-3 years of service. I could go on and on about how Romney was going to screw the middle class out of a retirement but you GOP-lovers won't listen to the truth. It doesn't matter - that horrible fanatical monster is gone forever and I can sleep nights now. I GUARANTEE you between now and 2015 the gains in the stock market will be astronomical. I think Europe is in much better shape because the worthless GOP Congress hasn't addressed our budget but eventually we will get there. GO LONG ON STOCKS AND AVOID GOLD. OBAMA!!!!!!
We elect a President to grow jobs. He never ran a snowball stand. His color NOT his character won the vote. America is in trouble at home and abroad.
This man is a slick talker nothing more nothing less
1. Knee-jerk reaction.
2. Sour Grapes.
Moreover, since the odds of the election's results were quite high by statistical analysis, yesterday's rally made about as much sense as today's selloff.
Looks as much like vengeance as any real belief that Obama's reelection spells disaster for America. The ones with the most money spent good money to ensure Romney's victory and are likely reacting by committing some form of stock market hissing fit in response to their unhappiness with the electoral results.
Overreacting? Just back up four years to the last election and the drop from then till the next spring.
Good luck with that theory.
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The Federal Reserve is meeting next week, and several of its own financial tests for reducing asset purchases appear to have been met.
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