Wall Street looks beyond US elections There was an embarrassing silence after Mary Schapiro, chairman of the Securities and Exchange Commission, spoke to the annual meeting of Wall Street lobby group Sifma this week. When the moderator opened the floor to questions, not a single banker stood up with a query. This despite the fact Ms Schapiro is writing the rules that will reshape their industry. Clearly, the audience had something else on its mind. Like just about everyone else in the US right now, Wall Street is obsessing about the election. At an earlier Sifma session, a panel of political operatives was peppered with questions on the latest polling data. Do the Ohio polls under-sample young voters? How many Senate seats are toss-ups right now? Which party has the stronger "ground game" in Florida? And on and on. Investors are devouring the work of analysts, strategists and other prognosticators who claim to know which stocks will outperform if Mitt Romney sweeps to power, and which would shine if Barack Obama is re-elected. The vexed issue of the "fiscal cliff," so important to the overall US economy, might be too complicated to game out at this point, but from a sector-by-sector view, some of the research is startling. From the start of the year, Jeffrey Kleintop, strategist at LPL Financial, began measuring the relative performance of two baskets of stocks, one stuffed with oil and gas companies and banks likely to get sympathetic treatment from the Republicans, the other with groups that could do better under Democrat policies. The "Democrat" stocks enjoyed a widening gap over the rival basket until almost precisely the moment that Romney won the first presidential debate on October 3 and put himself back in contention. Since then, the "Democrat" stocks" outperformance has narrowed from 22 per cent to about 16 per cent. Also cited as evidence of the Romney resurgence's effect on markets, the coal mining sector has surged 22 per cent since that debate and big banks are up a market-beating 4 per cent. The executive branch's most direct effect on business is through the people it appoints as regulators, so a Romney administration Environmental Protection Agency may quickly ease hostility to coal, while the next Mary Schapiro might go easy on the banks. Like coal, oil and gas is another sector touted as a winner if Republicans gain power. A second school of thought, though, suggests that Obama, with his penchant for loose fiscal and monetary policy, is more likely to stoke the inflation that keeps oil and gas prices high, aiding the sector more. The most sophisticated bankers are providing multi-dimensional ready reckoners for their clients, plotting winners and losers in each of the myriad combinations of congressional and presidential outcomes. With breathtaking precision, Goldman Sachs says shares of the nation's giant healthcare providers, such as Humana and WellPoint, will be worth 10 per cent more if Romney wins and Republicans capture the Senate, but that if Obama wins and there is no change to Congress, they will be worth 4 per cent less. A split decision, in which Romney wins but Democrats keep the Senate, will send the shares down 1 per cent. The logic is that, having promised to repeal Obamacare, Romney will encourage Congress to embark on Healthcare Reform II and that those businesses that lost out last time - like the providers, forced to widen coverage with squeezed margins - can be expected to claw back some profitability. Device makers might not be taxed as much as under Obamacare. Hospital stocks, which did well from the Democrats" reforms, could lose their privileges. The outcome of any new attempt to reform the sprawlingly complex US healthcare system is almost certainly going to defy prediction, just as it did three years ago when the Obama administration began negotiations. But healthcare provider stocks have outperformed the S&P 500 since the first presidential debate, putting on 1.5 per cent compared with the broader market's 2.6 per cent decline. Hospital stocks are down 7.2 per cent over the period. Long-term investors are hardly likely to make that punt when so much is up in the air. From now until polling day, though, it seems a good bet that the political junkies will be driving the market.