* Romney win could pose challenge to Fed's easy-money policy
* Stocks, bonds have rebounded during Obama administration
* Will jobs rebound come with benefits?
By Rodrigo Campos
NEW YORK, Nov 6 Traders and investors were in
agreement on one thing as voters cast their ballots in Tuesday's
U.S. presidential election: The markets want a clear winner by
U.S. equity markets rose on Tuesday, in part due to relief
that the drawn-out campaign had reached its end.
The final Reuters/Ipsos tracking poll on Monday showed a
tight national race, with Democratic President Barack Obama up
two points against his challenger, Republican Mitt Romney, at 48
percent to 46 percent. Polling averages also show Obama with
small but critical leads in Ohio, Virginia and Iowa.
Some market analysts forecast doomsday scenarios if a
particular candidate wins - predictions that usually reflect
their political leanings more than anything else.
Markets hate uncertainty, and having a drawn-out U.S.
presidential election is one of the worst prospects. No one on
either side wants a repeat of the protracted fight that followed
the 2000 race between Al Gore and George W. Bush.
"If we wake up Wednesday morning and we don't know the
results, that also pushes off the dealing with the fiscal cliff,
which is the next most important thing in our agenda," said Art
Hogan, managing director of Lazard Capital Markets in New York.
As U.S. voters cast their ballots, the U.S. stock market
rallied, with the benchmark Standard & Poor's 500 Index
up 0.79 percent. Over the last seven presidential election days,
the S&P 500 has averaged a gain of 0.85 percent, according to
Bespoke Investment Group of Harrison, New York, putting
Tuesday's move squarely in the realm of the usual election
day-performance for the market.
"Everybody is a winner today because the market is up across
the board," said Andrew Ahrens, chief executive of Lafayette,
Louisiana-based Ahrens Investment Partners, which oversees about
$750 million in assets. "But there may be some hangovers
Markets are terrified of the next step for the United States
- figuring out how to avoid plunging off the fiscal cliff or
$600 billion in tax increases and spending cuts that could kick
in next year and send the U.S. economy reeling.
The stock market "has been directionless over the last few
weeks because of uncertainty about what fiscal and tax policy
looks like next year," said Perry Piazza, director of investment
strategy at Contango Capital Advisors in San Francisco. "You
could argue that just having the uncertainty behind us could
lead to a bit of a relief rally."
Investors not only want a clear cut victory in Tuesday's
election but clarity on how the next U.S. president will work
with political rivals to avoid the fiscal cliff.
"The American people know it is essential for Washington to
reach agreement and solve the big problems facing this country
-- especially on our growing national debt and deficits as well
as immigration," said Bob Greifeld, chief executive officer at
NASDAQ OMX. "Without compromise, an enduring
uncertainty will continue causing corporations to husband their
cash, delay capital investments, and suppress hiring."
Whoever wins, the president will also have some sway over
monetary policy, even though the Federal Reserve is
theoretically independent from the government. A Romney victory
would throw the status of Federal Reserve Chairman Ben Bernanke
Romney has said he would replace Bernanke, whose dovish
monetary policy has been a pillar of the gains in both U.S. bond
and stock prices in the recent years.
A Romney victory may increase interest-rate volatility, said
Tom Sowanick, co-president and chief investment officer at
OmniVest Group LLC in Princeton, New Jersey. If Obama gets four
more years in the White House the current policy of quantitative
easing may accelerate, Sowanick said.
Unlike in 2000, Ohio instead of Florida is expected to be
the proving ground for taking the White House. At issue is
whether the Obama administration's bailout of the auto industry
will carry the day or whether Romney will maximize turnout in
the Ohio suburbs.
BIGGER IMPACT IF ROMNEY WINS
Many believe a larger move in the market could come as a
result of a Romney win. "I think the market is expecting an
Obama victory, so I think the most important thing is that you
don't get much of a response if you have an Obama victory,"
Jonathan Golub, chief U.S. equity strategist at UBS Securities,
The benchmark S&P 500 has rallied 67 percent since Obama
took office - one of the most impressive runs ever for stocks
under a single president.
"Interestingly, there has been a big divergence in the
performance of stocks in the United States versus overseas since
the 2010 midterm elections," according to Bespoke Investment
Group analysts. "Stocks in the United States are up 15-20
percent since then, while the rest of the world is pretty much
down across the board."
Heavy betting has been seen in the options market so far
this week on stocks that would specifically benefit from either
an Obama or Romney win, such as health care and energy shares.
Several different stocks are expected to show large moves in
coming days, according to JP Morgan derivatives strategist Marko
Those include shares like Aetna and United
Healthcare, which would be expected to do well under
Obama, and Arch Coal, one of the coal shares that could
benefit under a Romney administration. Coal stocks were strong
Tuesday, with Arch Coal gaining 3.8 percent, a sign of
speculation among some thinking Romney could win.
Investors believe coal and defense shares would benefit from
Romney winning, while health care and alternative energy would
do well under Obama.
Despite a downgrade of the U.S. credit rating from the
Standard & Poor's agency in August 2011, yields on the benchmark
10-year Treasury note hit historic lows last July.
Cumulative returns for all maturities on all U.S. Treasuries are
at 14 percent since the president's inauguration, according to
data from Barclays.