BUSINESS
09/14/2012 03:24 pm ET Updated Sep 14, 2012

Wall Street May Hate Obama, But It's Betting On His Victory

Wall Streeters may not want President Obama to get reelected, but that is not going to stop them from trying to make money on his possible second term.

Traders are increasingly betting on industries that thrive under Democratic leaders and against those companies that might do better in a country run by Mitt Romney and Republicans, according to a new Wall Street Election Poll Index created by Jeffrey Kleintop, chief market strategist at LPL Financial, a Boston brokerage.

The index, which dates back to the start of the year, tracks the stock performance of industries helped by Democrats against those typically helped by Republicans. It is up 15 percent so far this year, hitting a new high this week.

"The market continues to increasingly reflect a status quo election outcome," Kleintop wrote in a research note. By "status quo," he means "four more years."

Kleintop's index echoes another market measure moving in Obama's favor: The president's chances of reelection in the "prediction" market Intrade jumped to 66 percent on Friday, the highest of the year.

But take heart, Romney fans: Despite what Ayn Rand may have told you, financial markets are not infallible. Earlier this year, for example, Intrade got the Supreme Court's decision on Obama's health care law dead wrong.

But even though Intrade and other financial markets are not perfect predictors, they are clearly reflecting a recent shift in the conventional wisdom, and the polls, in Obama's favor.

That shift was also captured by a recent CNBC poll, which found that 46 percent of Wall Street "money managers, strategists and economists" expected an Obama win in November, compared with only 24 percent who expected Romney to win.

The other interesting wrinkle in that CNBC survey was that the majority of those responding preferred Romney to Obama: 53 percent to 18 percent. And Wall Street has certainly been putting its campaign donations where its heart is, abandoning Obama after supporting him in 2008. Employees of the "securities and investment" industry have given nearly $11 million to Romney in this election cycle, compared with less than $4 million for Obama, according to Open Secrets.

But Wall Street is putting the rest of its money in Obama-favored industries, and probably not because, as Michael Lewis claims, Obama acts like a Wall Street trader.

It's called hedging your bets. It indicates that although Wall Street might grumble about an Obama victory, it also apparently doesn't expect all commerce to halt and all private industry to be immediately nationalized by the government upon the president's re-inauguration.

Industries that are expected to thrive under Democratic leadership, according to Kleintop, include health care companies, homebuilders and construction materials -- because we will all be building new houses with the money we save under Soviet-style health care, obviously. Industries in the Republican camp include oil and gas drillers, banks and managed-care facilities -- because of freedom.

Of course, Wall Street itself has done pretty well under Obama's presidency. Although the president occasionally says hurtful things about that long-ago unpleasantness with the whole "financial crisis" or whatever, nobody has gone to jail, or even had to pay very much in damages for the mess.

And pretty much all industries have been doing well lately, because the entire stock market has been doing well, thanks in part to the Republican-appointed Fed chairman Ben Bernanke, who is obviously in the tank for Obama because he is blowing cash all over the place. But the Dem-friendly industries have done a little better, so Kleintop's Dem-friendly index is rising.

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