A Houseful of Democrats? No Problem
DEALS, DEMOCRATS AND DUNCES. The letter D stood for anything but down in the stock market last week, as investors generally took the Democrats' ascendance in Congress in stride.
The Dow Jones Industrial Average finished the week at 12,108.43, up 1%. Similarly, the S&P 500 gained about 1.2%, to end at 1380.90. The technology-stock-laden Nasdaq index outperformed both, ending the week at 2389.72, up 2.5%.
A flurry of takeover announcements Monday put the market on a solid enough footing to withstand the Democratic electoral sweep of the Republicans, AKA the dunces, and the likely prospect that the left-of-center Nancy Pelosi, a California Democrat, soon will be speaker of the House.
The election was more a vote of no confidence in the administration's prosecution of the Iraq war than a reflection of fundamental change among voters, says Frederic Marks, chief investment officer of Cheviot Value Management. "The market rise after the resignation of Defense Secretary Donald Rumsfeld was probably investor relief that the message got through," he adds.
The "Rummy rally," as some dubbed it, also suggests investors are thinking the risk premium related to the war on terror will go down, says Henry McVey, chief U.S. investment strategist at Morgan Stanley.
Though the market did fine, certain stocks and sectors did not. The health-care sector was wounded by the Democratic surge, perhaps giving investors a buying opportunity. More on that below. Declines at Johnson & Johnson (ticker: JNJ), Pfizer (PFE) and Merck (MRK), in particular, restrained gains in the Dow.
The shares of home builders, which had been among the leaders of the equity rally since midsummer, eased about 1%, as hope for an interest-rate cut -- a powerful factor in the market's rise this year -- ebbed somewhat.
In Friday's action, Walt Disney (DIS) dropped 3.7% to 32.40. Though the entertainment company reported fourth-quarter earnings that beat Street expectations, the stock was hit by investor concerns about the sustainability of that growth next year.
Though the economic outlook is uncertain, continued takeover activity and stepped-up corporate stock buybacks suggest stock-market valuations still look attractive, says John Buckingham, chief portfolio manager at Al Frank Asset Management.
The elections were important, but the buyouts are another force at work acting as a floor for share prices, says Morgan Stanley's McVey. Oddly enough, at this point good news on the economy -- which would push the Federal Reserve to raise interest rates -- would be bad news for stocks, he adds.
With the midterm elections over, it's no surprise market pundits dragged out a hatful of historical trends, some more curious than predictive. For example, markets generally have done better with Democrats controlling Congress. And, since 1960, every third year of a president's term -- 2007 will be one -- has been positive for the stock market. In all but one such year, stocks have run up by double digits.
OK, one more: Under a Republican president, the S&P 500 has performed best when the Democrats controlled at least one house of Congress.
THE DEMOCRATIC ELECTORAL VICTORIES last week sent a gamut of health-care stocks tumbling, amid fears the Democrats will revisit the Medicare Drug Benefit with an eye toward lowering prescription-drug prices, and otherwise meddle with the profitability of the health-care sector. Among the 10 worst-performing S&P industry groups were health-care suppliers, down 6.6%; pharmaceuticals, down 3%; managed health, down 2.6%, and health-care services, down 1%.
The market's fear is not unreasonable, given the Dems' populist policy bent. Yet, history and the checks and balances that will circumscribe action by this Congress suggest the decline in shares prices might present some buying opportunities in the sector.
What can the Democrats actually do to the industry at this juncture? Even with Republican majorities in both the House and Senate, President Bush was unable to push through any of his legislative programs or proposals this term, says Sherry Cooper, a strategist at BMO Financial Group in Toronto. The Democrats, with their workable majority in the House and one-vote majority in the Senate, likewise will have little opportunity to make significant changes, she adds, as Bush has veto power and Senate Republicans still are strong enough to filibuster.
"Given how contentious [health care] is, and how small a majority they have, I find it hard to imagine they will get anything through," says Cooper. There will be proposals to fight "Big Pharma," but that's what they'll remain, she predicts.
History has shown that health-care companies, and drug companies in particular, tend to underperform the market in the two months leading up to an election, as uncertainties surrounding the outcome create more risk for investors, says Jack Ablin, chief investment officer at Harris Bank in Chicago. However, the stocks outperform in the two months following an election, as reality proves better for the group. Among S&P industry sectors, health care currently is enjoying some of the biggest upward earnings-estimate revisions for 2007.
The shares of healthy companies such as Johnson & Johnson, Pfizer and Abbott Laboratories (ABT) took it on the chin last week, but they and others should bounce back in the weeks ahead.
民主党赢得选举 投资者反应淡定
上周市场的主要话题可以用三个D打头的词来概括：Deal（并购交易）、Democrat（民主党人）和dunce（傻瓜）。这个D绝不包括表示下跌的“down”，在民主党再次夺回国会控制权后，投资者反应从容，股市平稳上升。
上周，道琼斯工业股票平均价格指数上涨1%，收于12,108.43点；标普500指数涨1.2%至1380.90点；以科技股为主的那斯达克综合指数涨2.5%至2389.72点。
上周一宣布的一系列并购交易让市场获得极大支撑，足以抵御民主党在中期选举中击败共和党（傻瓜们）的事实及中左翼加州民主党人南希?佩洛西(Nancy Pelosi)不久将出任众议院议长的前景可能带来的冲击。
Cheviot Value Management投资总监弗里德里克?马科斯(Frederic Marks)说，此次中期选举结果更应被看作是选民对政府进行的伊拉克战争投了不信任票，而不是选民的看法有了根本性改变。他还说，股市在国防部长拉姆斯菲尔德(Donald Rumsfeld)辞职后上涨可能表明，投资者对选民的不满情绪已得到传达感到欣慰。
摩根士丹利(Morgan Stanley)的首席美国投资策略师亨利?麦克维(Henry McVey)说，这一被戏称为“拉氏上扬”的走势也表明，投资者认为，与反恐战争有关的风险溢价将回落。
虽然市场总体表现不错，但某些个股和类股却难如人意。民主党控制国会的前景使医疗保健类股受到冲击，这或许是投资者的买进机会。股市大盘也因此而受到一定影响，强生(Johnson & Johnson)、辉瑞(Pfizer)和默克(Merck)等医药类个股的下跌限制了道指的涨幅。
自盛夏以来一直领涨股市的住房建筑类股上周也下跌了1%左右，原因是降息前景减弱了，而这一前景一直是推动该类股今年涨势的一个有力因素。
在上周五的交易中，迪斯尼(Walt Disney)跌3.7% 至32.40点。虽然该公司此前公布的四季度收益超出了华尔街的预期，但投资者担心该公司明年的业绩难以维持这一势头。
Al Frank Asset Management的首席投资组合经理约翰?白金汉(John Buckingham)说，虽然经济前景尚不确定，但从不断传出的收购交易和频繁的公司股票回购来看，目前的股价水平看上去仍很有吸引力。
摩根士丹利的麦克维说，选举结果固然重要，但企业并购行动也为股价提供了支撑。他说，奇怪的是，目前有关经济的好消息──它们将促使美国联邦储备委员会(Federal Reserve)加息──对股市来说却是坏消息。
随着中期选举的结束，股市预测师们开始更多关注历史趋势也就不足为奇了，这些趋势中有一些真是匪夷所思。例如，民主党控制国会时股市表现总体而言更好些。而且自1960以来，每位总统四年任期的第三年──2007年就将是这样一年──股市表现都不错。这些年份中股市的涨幅都达到了两位数，只有一次例外。
还有呢，在共和党人任总统的时候，如果民主党至少控制了国会两院中的一院，那么标准普尔500指数的表现是最好的。
民主党上周赢得中期选举使医疗保健类股全线下跌，因为投资者担心，基于要降低处方药价格的考虑，民主党人将重新审视联邦医疗保险处方药物计划(Medicare Drug Benefit)，也不排除民主党人会提出不利于医疗保健业盈利的议案。医疗保健服务提供商类股下跌了6.6%，成为标准普尔指数成份股中表现最差的10个类股之一；制药公司类股下跌了3%；管理医疗类股下跌了2.6%，医疗保健服务类股下跌了1%。
鉴于民主党有“为民作主”的政策倾向，市场的这一担心也不是没有理由的。但历史经验以及将限制本届国会采取行动的各种权利平衡表明，医疗保健类股目前的下跌可能恰恰为投资者提供了一个买进的机会。
民主党人控制国会后会对医疗保健业采取哪些行动？BMO Financial Group驻多伦多的策略师谢利?库珀(Sherry Cooper)说，即使是在共和党控制参众两院多数席位时，布什总统也无法在国会强行通过他的立法建议，而中期选举后民主党虽然在众议院拥有实质多数席位、在参议院的席位也比共和党多一席，但它同样也难以对现行政策作出重大改变，因为布什总统拥有否决权，而共和党在国会拥有的席位也足以使其阻止民主党任意行事。
库珀说，鉴于医疗保健问题的争议如此之大，而民主党在国会的多数席位优势又如此之小，因此很难想像民主党将能如愿以偿。她预测说，虽然民主党可能会提出一些打击大制药公司的议案，但却不会对后者造成什么损失。
Harris Bank驻芝加哥的首席投资长杰克?埃伯林(Jack Ablin)说，历史经验表明，医疗保健类公司，特别是制药公司，在大选前的两个月其股市表现往往落后于大盘，因为选举结果的不确定性给投资者带来了更大风险。但这类股票在选举后的两个月却会表现强于大盘，因为事后的现实往往没那么糟。在标准普尔指数各类股中，医疗保健类股2007年每股预期收益被上调的可能性最大。
Vito J. Racanelli
