Obama Wins, Stock Futures Turn Red
The elections are over. President Obama gets another four years in the White House. This means Ben Bernanke remains at the Fed. Tim Geithner will remain at Treasury if Obama insists, but Geithner has made clear his preference to step down. Analysts are speculating about who might replace him. Chances are, however, that Geithner will remain at least until some compromise is reached on the fiscal cliff, the most important immediate issue facing the government.
As for stocks, the Obama victory means that the Fed’s easy money policy will continue indefinitely. The effect is already wearing thin, but this policy could fuel the rally in stocks and commodities a little longer. Over the long term, however, it runs the risk of fueling inflation. The Obama victory is bad news for medical device manufacturers who are facing a 2.3% excise tax on the price of their products. This is a tax that will come right off the top line. It’s also bad news for for-profit education companies and financial companies, both of which will face more regulatory hurdles. Obama’s victory is good news for alternative fuel companies, especially those working in the solar and wind industries. It’s bad, however, for traditional carbon-based energy companies. It means less drilling for oil and gas than we would have seen under a Mitt Romney presidency. Obama’s victory also means that Obama Care will not be tweaked. As a result, healthcare insurance companies should see more customers even though profit margins could decline.
The stock market rallied strongly on Tuesday. Perhaps investors, who tend to favor Republican policies on the economy, thought Mitt Romney might actually pull off a victory. Or perhaps they were just happy that the uncertainty was about to end. Whatever the case, investors seem to be suffering from a morning-after hangover. As of early Wednesday morning, stock futures are decidedly in the red.
Vahan Janjigian is Chief Investment Officer at Greenwich Wealth Management, LLC, a SEC Registered Investment Adviser, where he manages portfolios for clients in separate accounts. Dr. Janjigian is a former Forbes magazine columnist and former Editor of the Forbes Special Situation Survey. According to Hulbert Interactive, his stock picks returned more than 18% annually during one of the market’s worst 10-year periods.
Dr. Janjigian holds the Chartered Financial Analyst designation and has earned degrees in general sciences and finance from Villanova University and Virginia Polytechnic Institute and State University (Virginia Tech). He previously served on the faculties of several universities, including the University of Delaware, Northeastern University, the American University of Armenia, and Boston College, where he taught courses in corporate finance, financial theory, investments, accounting, and economics; and he currently teaches a seminar on equity investment management to business executives in Singapore through Baruch College’s Zicklin School of Business. Dr. Janjigian has served as an expert witness on matters involving portfolio management, churning, suitability, and hedge fund manager compensation.
Dr. Janjigian has published his research in numerous scholarly and professional journals; and has been quoted in many leading newspapers and magazines, including Barron’s, Forbes, The Wall Street Journal, and USA Today. He appears as a guest commentator on various television and radio networks, including Fox, CNBC, MSNBC, and CBS Radio. Dr. Janjigian is the author of Even Buffett Isn’t Perfect (published by Penguin) and co-author of The Forbes/CFA Institute Investment Course (published by Wiley).