We're told that what matters for pharmaceutical stocks is the presidential election: If

Al Gore

wins there's going to be red tape -- possibly price controls -- and if

George W. Bush

gets the job there won't.

But what has really mattered for drug stocks this year has been how techs have performed. When the techs have risen, the drugs have fallen, and vice versa. Look at a chart of the tech-heavy

Nasdaq Composite Index

against the

Amex Pharmaceutical Index

and it's apparent; talk to traders, and they'll mention how often they've seen accounts switch drugs for tech, and tech for drugs.

Recently, it is the drug side of the equation that's been winning. Earnings warnings from the likes of

Intel

(INTC) - Get Report

,

Lexmark

(LXK)

and

Apple

(AAPL) - Get Report

have sparked worries of a tech profits slowdown, and that has sent the Nasdaq down more than 11% this month. Meanwhile, the drug index is up 5.6%.

Way Back When

Drugs and techs haven't always traded at odds with each other -- they matched each other pretty well for most of the 1990s, and for a pretty good reason. Both groups were considered growth plays by investors, sectors that could deliver earnings no matter what. And both groups still hold overweight positions -- particularly tech -- in the average growth fund, according to

Morningstar

TheStreet Recommends

. Many reckon that growth fund money has simply been sloshing back forth between tech and pharmaceuticals in a year in which the overall market hasn't really done all that much.

Breaking With the Past
Drug, tech stocks go their own way

Source: BigCharts

"That we're not seeing both groups moving up together says that a lot of money isn't coming into the market just yet," says Steve Goldman, market strategist at

Weeden

. By the same light, it also suggests that money isn't leaving the market so much as moving from one temporary home to another.

What prompts that move is where it gets interesting. Many portfolio managers are obliged to remain fully invested in growth, and they focus in on big pharma and big tech because that's where the earnings visibility and the market liquidity are. "Anytime the electronic side of that growth spectrum looks a little dicey, money tends to seek haven on the healthcare side of the spectrum," says Charlie Crane, market strategist with

Spears Benzak Salomon & Farrell

.

Together So Long
Similar trading before 1999's tech blowout

Source: BigCharts

And so, when techs fell apart this spring, drug stocks rallied. More recently, as techs have fallen prey to earnings worries, the drugs rallied anew.

To some, this disparity points to some big differences between techs and drugs. Note that drugs are considered the

safe

asset, the place to go in times of trouble. Now think of how that safety/risk dichotomy falls with other investments. Bonds vs. stocks. Developed markets vs. emerging markets. Big-caps vs. small-caps. Money tends to flow toward the safe thing when the business environment gets tough and to the risky thing when the business environment gets easy. In other words, the market is viewing tech company earnings as vulnerable to ups and downs of the economic cycle while drug stocks are not.

Cyclicality

"I would vote for the notion that investors will increasingly view techs as cyclical," says

J.P. Morgan

equity strategist Doug Cliggott. "Pharmaceuticals are the antithesis of that. You want to aggressively own pharmaceuticals when global growth is slowing."

Because people tend not to skimp on their health even when times get tough, and because many have health insurance paying for care, drug company profits tend to grow steadily even when the economy turns down. Moreover, favorable patent laws mean the pharmaceutical industry does not face the competitive constraints that other industries do, and this keeps its products from becoming commodity items.

There's a suspicion that techs aren't inoculated in the same way against the global economic cycle.

"Tech stocks are revealing themselves to be cyclical," contends

DLJ Asset Management

Vice Chairman Stanley Nabi. "In the last few years, they have been billed as growth without cyclicality, but they are cyclical."

It's a point of view the market has lately come to accept. The U.S. economy is clearly showing signs of slowing, and the huge rebound the world economy saw last year has begun to peter out. Some high-profile tech warnings -- replete with complaints about slower sales -- and talk of tech's vulnerability to the cycle come inevitably. In the next week or so, however, earnings will start coming in. If past is prologue, the reports will come in much better than investors, buffeted by warnings from some high-profile companies, have begun to fear. As quickly as it left tech for the safe haven of the pharmaceuticals, money could come skittering back.