Obama good for bonds, Romney good for stocks | Trading Desk ...

Obama is good for bonds, Romney is good for stocks.

That?s the essence of a client survey conducted by Barclays between Oct. 24 and 26. The 354 respondents are collectively responsible for more than US$10-trillion in assets under management.

?Investors seem to believe in a more promising growth outlook under a Romney win, in spite of their concerns about a likely tighter monetary policy stance,? said Michael Gavin, an International Macro Strategist at Barclays.

He noted that this group favours long equities and short bond portfolios as the best way to express a win by Republican presidential candidate Mitt Romney, with as many as 16% expecting a deep and sustained equity rally in that case.

Under a victory by U.S. President Barack Obama, investors polled favour bonds and are divided about the direction of equities, anticipating any sell-off in stocks would be small and short-lived.

The survey also demonstrated a strong divergence in perceived policy risks depending on who is elected on November 6.

Under an Obama victory, congressional deadlock and tax/regulatory impediments were the most commonly cited concerns.

?North American investors seem substantially more concerned about the potential pitfalls of business unfriendly policies under an Obama administration relative to European investors, whose main concern under an Obama win is congressional gridlock,? Mr. Gavin told clients.

As for the risks attributed to a Romney win, tighter Fed policy topped the client concerns, followed closely by fiscal tightening and protectionism.

?Investors also worry about congressional gridlock under Romney,? the strategist said, noting that it is mentioned less often than under Obama, but still substantial.

As for the bond market, more than half the investors who cited Fed policy as their primary concern expects the 10-year bond yield to rise at least 20 basis points.

?But the expectation of a rise in rates could be more general than this, and may also be linked to expectations of a constructive outlook for growth, reflected in clients? equity views under a Romney victory,? Mr. Gavin said.

He noted that half of the investors who see a substantial equity rally also expect rates to rise meaningfully, while only 16% expect rates to fall.

Source: http://business.financialpost.com/2012/10/30/obama-good-for-bonds-romney-good-for-stocks/

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