Have you ever noticed how geopolitical events that seemed extremely important at one time, causing major market moves, just fade away after a while?
Just two years ago, it seemed that Pakistan and India were on the verge of nuclear war. Since then, nada. How about El Salvador and Nicaragua, subject of so much angst during the Reagan era? No news for years.
More recently, how about the danger of China, the whole outsourcing debate and the devaluation of the yuan? Yawn. That's so last year.
Whether we are hard-wired to forget unpleasantness or simply have national ADHD, amnesia is a permanent psychological part of the economic, political and investment landscape.
And so if there were two concepts that seem destined to wind up on the scrap heap of contemporary history in relatively short order, they might be Iraq and the high price of oil.
Both theoretically work against President Bush in his campaign for the presidency, but both are on the verge of becoming nonevents that affect neither stocks nor the election in ways that most observers currently believe likely.
The longer the GOP bogs down Democratic candidate John Kerry into a time-consuming debate about his Vietnam medals, eclipsing a weak economy and a mismanaged Iraq war effort in headlines, the more likely Bush will be awarded four more years.
A Big Wind Blows
Already it appears that the stock market, one of the most successful forecasting tools on the planet, has begun betting on a second Bush presidency. The sorts of stocks that should prosper in his administration have begun to surge in recent weeks along with his poll numbers.
The mid-August turnaround in the market seems to have coincided neatly with the turnaround in Bush's re-election chances and with Hurricane Charley. It's as if a big wind blew away voters' and investors' memories of unkept promises, from job growth to the capture of Osama bin Laden, and reset the chessboard for a new game.
If Wall Street really is ready to forgive and forget on issues ranging from drug reform to the budget deficit, how will we see it in the stock market? Or conversely, how will we see in equities that Kerry is gaining? By observing the names that are bid up and those that are tapering off.
Let's take a speculative look at Bush-bet sectors and how they stack up vs. Kerry crusaders.
The best bets in favor of Bush are -- duh -- ones in favor of dividend-paying stocks, energy and basic materials.
The reason for the first group is tax policy: The elimination of so-called double taxation on certain dividends pushed by the Bush administration would probably be one of the first fiscal policy initiatives reversed by a new Kerry administration. (REITs and foreign dividends for instance don't receive the lesser tax burden.) If investors thought that dividend-paying companies were about to have their big tax benefit kicked away, they would start selling them now. Instead, qualified dividend payers, like banks, have been on a tear.
Energy is an obvious Bush choice because he is the prince of the oil patch and drillers would continue to have an operational field day in a second Bush administration. But basic materials, such as chemical manufacturers and forest products companies, should also see their fortunes improve as environmental regulations are recklessly loosened, lowering the cost of doing business. They may also finally see asbestos liabilities cleared away in a more sympathetic, devil-may-care second term.
It's pretty hard to pinpoint stock groups that would prosper under Kerry, but we can guess that if the champion of the downtrodden fulfilled his promise to create more jobs, the money would filter down to the recently trashed small discount retail chains.
Also, on the other side of his psychosocial spectrum, we'll give him the latte and white-wine stocks, as well as ones representing his major backers in Hollywood and the big media. Plus you've got to give him at least one French stock.
He also gets
because I noticed on a campaign contribution report that one of its top executives was a leading donor to the Kerry campaign.
Of all these, the most attractive long-term ideas are the discount variety stores like
, as they're currently most unloved and disrespected. I'll watch all of these in the next two months.
If you'd like to offer your views of which sectors to track for Bush and Kerry,
send me an email with the word "campaign" in the subject field.
As originally published, this story contained an error. Please see
Corrections and Clarifications.
Jon D. Markman is publisher of
StockTactics Advisor, an independent weekly investment newsletter, as well as senior strategist and portfolio manager at Pinnacle Investment Advisors. At the time of publication, Markman had positions in none of the stocks mentioned in this column. While he cannot provide personalized investment advice or recommendations, he welcomes column critiques and comments at
firstname.lastname@example.org; please write COMMENT in the subject line.