President Obama gets four more years, and Wall Street isn't surprised.
Equity futures were significantly lower Wednesday, but on Election Day there was a robust rally. Investors weren’t sure whether to call it an Obama Rally or a Romney Rally at the time; now we know, it was the former.
But a 133-point gain for the Dow Industrials on Election Day is certainly uncommon. Looking back on every Election Day since 1984, the Dow hasn’t moved more than 39 points in either direction, except for Election Day 2008, when investors expecting an Obama victory, pushed the Dow up 305 points. Volatility ensued after that, throwing the stock market in every direction in the following weeks.
Will there be a repeat performance this year? Maybe.
For one thing, there's still a lot of uncertainty. The so-called fiscal cliff of mass spending cuts and tax increases will take effect in January if Congress can’t agree to stop it. That could mean a tax hike for some 90% of Americans, and perhaps another economic recession in the first half of 2013.
President Obama's re-election also affects your paycheck and your investments. The President and most Democrats want to raise taxes on income above $250,000. And if you're a saver, don’t expect to earn more interest on the money you have stashed away. The President is pro monetary stimulus, so perhaps another round of quantitative easing is in the cards, as interest rates stay parked near zero longer.
On Wall Street, some sectors have responded along traditional party lines. Romney- (or Republican-) related sectors include energy, materials, and financials. That's one reason the four financials in the Dow Industrials -- JP Morgan Chase, Bank of America, American Express, and Travelers -- were among the top gainers Tuesday. The thinking was that Romney would pull-back on some financial regulation.
Materials also turned in a strong performance Tuesday. Since Mitt "I Like Coal" Romney trounced President Obama in the first debate on October 3, coal stocks have surged 26%, compared with a 3% decline in the S&P 500 in that time.