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Has Wall Street made up its mind on this election? One analyst, Jeffrey Kleintop, has divined just who the investment class believes will be president by developing one of those magic election-year metrics. (Double the price of a bag of groceries in St. Louis, divide by each candidate’s favorability rating in the Rust Belt, and voilà—the winner!) Kleintop’s Wall Street Election Year Index (.pdf) looks at specific stocks that are enjoying an uptick. The theory goes that a certain basket of stocks traditionally does better under Democratic presidents and a different basket does better under Republican presidents. Check to see which basket is doing better in the run-up to the election, and you know who Wall Street thinks will win.
This year’s mix is revealing. Kleintop believes a good hedge fund, confident in a win for Mitt Romney, would move its portfolios toward major segments of the energy sector. Conversely, since an unrepealed Affordable Care Act promises to bring in millions of new customers to the health care industry, one might expect a rise in stocks specializing in “health care facilities” and “health care services” in anticipation of an Obama win.
Kleintop says he not only looks at the top stocks, but also employs an algorithm that will “strip out and balance out the cyclicality,” as he told CNBC’s Jeff Macke earlier this summer. Checking the top five or ten health care and energy stocks on an anecdotal basis (and thus surrendering to the evils of cyclicality) reveals no demonstrable prediction from Wall Street. But according to Kleintop’s algorithm, another class of investments is also set to grow if Obama wins reelection—the one that encompasses “construction materials,” “homebuilding,” and “construction and farm machinery.” And here, the big portfolio managers seem to have shaken their Magic 8 balls and come up “Obama.”
I googled the top stocks in the category of construction materials, and what I saw was fascinating. Not only does Wall Street seem to be betting its portfolios on Obama, it would appear that its collective realization occurred during the ramp-up to the conventions, sometime in July. At that time, Wall Street started to see a rosy future in the construction sector—a view that seems to be prevailing, with the top stocks there surging from 20 to 50 percent a few weeks ago. Below are charts showing trends for the top ten construction-materials stocks. The jump is unmistakable—you don’t find a loser until you get to the tenth, Clarcor.
In Connecticut, where I live, there’s no hiding the fact that while the state at large might prefer Obama, the money—i.e., Fairfield County: Greenwich, Stamford, Cos Cob, suburban Bridgeport—has abandoned him this time around. In 2008, in the part of Bridgeport where the big funders live, Obama raised nearly $4.5 million, compared with $2.8 million for John McCain. This time, Obama has come away with just over $1 million, while Romney has gathered about $4 million.
A friend of mine recounted for me a luncheon for equity-fund managers a few days ago in New York, at which the host asked some 500 of Wall Street’s finest to use a private voting device to answer a few questions. “The MC asked us to vote on who we WANT to win the election,” my friend wrote. “53% of the room said they wanted Romney to win. Obama got 47%.”
Perhaps that vote by itself is news—47 percent of equity-fund managers prefer Obama? But then the MC asked who they thought would actually win. “Over 70% said Obama would,” said my friend.
So, while the leaders of our financial sector are betting their personal funds on Romney, they’re betting their portfolios on Obama. I guess they don’t call it hedging for nothing.
More from Jack Hitt:
Political Asylum — November 6, 2012, 2:01 pm
Obama’s data-driven approach may decide today’s race—and determine the future of the G.O.P.
Flor Arely Sánchez had been in bed with a fever and pains throughout her body for three days when a July thunderstorm broke over the mountainside. She got nervous when bolts of light flashed in the sky. Lightning strikes the San Julián region of western El Salvador several times a year, and her neighbors fear storms more than they fear the march of diseases — first dengue, then chikungunya, now Zika. Flor worried about a lot of things, since she was pregnant.
Late in the afternoon, when the pains had somewhat eased, Flor thought she might go to a dammed-up bit of the river near her house to bathe. She is thirty-five and has lived in the same place all her life, where wrinkled hills are planted with corn, beans, and fruit trees. She took a towel and soap and walked out into the rain. Halfway to the river, the pains returned and overcame her. The next thing Flor remembers, she was in a room she didn’t recognize, unable to move. As she soon discovered, she was in a hospital, her ankle cuffed to the bed, and she was being investigated for abortion.
Average amount of time a child spends in Santa Claus’s lap at Macy’s (in seconds):
Beer does not cause beer bellies.
Following the arrest of at least 10 clowns in Kentucky and Alabama, Tennesseans were warned that clowns could be “predators” and Pennsylvanians were advised not to interact with what one police chief described as “knuckleheads with clown-like clothes on.”
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“Matt was happy enough to sustain himself on the detritus of a world he saw as careening toward self-destruction, and equally happy to scam a government he despised. 'I’m glad everyone’s so wasteful,' he told me. 'It supports my lifestyle.'”