Obama Won, But Don't Trade on His Promises

The stock market often overreacts to electoral results, creating opportunities for investors who ignore the promises of the winning party and keep their eyes on earnings fundamentals.

Democrat Barack Obama on Tuesday easily defeated Republican John McCain and is poised to be sworn in as the 44th U.S. president on Jan. 20. Stock market futures traded lower Wednesday, but the reaction did not necessarily constitute a reaction to the presidential race, as investors took profits after a rally on Tuesday and reacted to weak earnings reports.

Threats of heavy regulation for some industries or promised big incentives for others tend to get watered down as they make their way through the legislative process. Politicians like the spotlight; they want to inspire us, but when it comes to actually doing something, they tend to get bogged down by pesky little problems like democracy.

"You've had situations like in the 1960s where President Kennedy got up and jawboned the steel industry and the stocks of the steel companies collapsed," recalls Mario Gabelli, Chairman and CEO of GAMCO Investors, which oversees about $28 billion in assets.

Kennedy won that standoff and regulation increased, but labor issues played a much more important role in shaping the industry in the 1960s, according to Jonathan Rees, a history professor at Colorado State University-Pueblo, who has written extensively about the U.S. manufacturing industry. In fact, regulation has meant relatively little for U.S. heavy industry in general since World War II, Rees argues, and he doesn't see that trend changing anytime soon.