With the election a nail biter and the stock market stalled out, traders have been watching sectors that reflect the views of the presidential candidates for clues to Tuesday's too-close-to-call election.
Stocks that would do well with Mitt Romney in the White House have been outperforming recently, but longer term they lag the sectors that would fare better if President Barack Obama wins re-election.
On Monday, there was selling in some sectors that could be especially hurt if President Barack Obama stays in office.
That includes banks, presumably because he's viewed as tougher on financial regulation, and dividend-paying REITs and utilities because he favors higher taxes.
Jeff Kleintop of LPL Financial has created a relative strength index showing Romney stocks, such as coal, specialty retail, managed care and telecommunications services, versus Democrat favored stocks like healthcare services, homebuilding and food and staples retailing.
"Since the start of the year, the Democrat portfolio, the Democrat favored sectors have outperformed and they remain higher. Since the first debate, we've seen it shift back towards the Republicans.We've seen industries like coal, which Romney mentioned many times, move in a huge way," said Kleintop, adding banks and managed care stocks also moved higher.
After the first debate, Romney, Wall Street's preferred candidate, edged ahead in the polls and now the race is neck and neck.
CNBC created its own Obama and Romney portfolios. The Obama portfolio is up 20 percent year-to-date but it is flat, up just 0.1 percent since the first debate. Since then, the biggest loser on the Obama list is Vanguard Health .
Romney's portfolio, meanwhile, is up 1.25 percent since the first debate, but the portfolio is up just 1 percent for the year. The best performing stock in that portfolio is James River Coal, up 75 percent since the first debate.
Barry Knapp, head of equity portfolio strategy at Barclays, said his Romney basket outperformed the S&P by 400 basis points in October but it's since lagged.
On Monday, as the stock market recovered gains in the afternoon, he credited the move on more positive sentiment about Romney.
With Super Storm Sandy dominating the news, Obama has been seen to have gained some momentum but the polls remain tight.
"People came in this morning thinking Romney could lose and as the day's gone on, I've gotten more calls and people are talking about it. I think the market is rallying now on the idea it could still go to Mitt," said Knapp.
Knapp said the market may be acting the way it did in 1980, when Ronald Reagan took the White House. The market moved lower in the end of October, but then rallied after the election.
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"I think if Mitt Romney wins, you will get a bounce in business confidence," said Knapp. "There's obviously policy beneficiary sectors – big banks and managed care." Sectors that would be lifted by capital spending would also benefit, he said.
Kleintop said the Senate races are key. If Democrats hold the Senate, there is still the likelihood of gridlock, no matter who wins. "I think the focus turns to the Senate and the lame duck session which starts as soon as Nov. 13," said Kleintop.
"The market will be very quickly laying odds on how, when and if they deal with the fiscal cliff." The fiscal cliff is the double whammy that could hit the economy, if Congress fails to act on expiring tax cuts and the start of automatic spending cuts Jan. 1.
The Dow on five of the last six presidential election days moved less than a percent. On the last election day, when Obama was elected, the Dow gained 3.3 percent, its biggest election day move since 1932 when Franklin Roosevelt defeated Herbert Hoover, and the Dow rose 3.5 percent.
Two of the next biggest moves on the last 20 presidential election dates were the Reagan years. In 1980 when Reagan defeated Jimmy Carter, the Dow rose 1.4 percent, and it rose 1.2 percent the day he was re-elected in 1984.
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