Turns out there was a worse result than no result in the presidential election on Tuesday: More of the same! Another four years for Barack Obama, along with a Republican-controlled House and the Senate remaining in the hands of the Democrats brought out the sellers on Wednesday, and it suddenly looks like the rest of 2012 may be a wild ride.
"We believe that this kicks off a period of uncertainty surrounding the fiscal cliff and U.S. deficits," wrote Jonathan Golub, chief U.S. equity strategist at UBS, on Wednesday. "We believe that this debate will be messy and drawn out (likely pushed out beyond the 12/31 deadline), resulting in increased investor angst."
Golub sees a potential positive lurking in this scenario if legislators decide to think big and do more than just pursue a stop-gap solution. "While initially the debate will focus on 'cliff avoidance,' we believe it will highlight the need for a 'grand bargain' to address ongoing trillion dollar deficits," he added. "Should such an agreement be reached, we could see stocks meaningfully higher on both earnings and valuations upside." In the near term, Golub listed a number of industries he expects to benefit from Obama's victory, including cell towers, derivatives exchanges, infrastructure, building products, discount retailers, drug retailers, hospitals, and clean/alternative energy. Specific stocks he mentioned were American Tower (DIS), Crown Castle International (CCI), CME Group (CME), United Rentals (URI), AECOM Technology (ACM), and Mohawk Industries (MHK). Golub's other advice was for investors to keep a focus on the United States. "Stay domestically oriented," he said. "While we face a challenging cliff debate, we continue to see greater strength in the U.S. than in most parts of the world. Further, domesically oriented businesses tend to be less cyclical and have been delivering more attractive results."
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