Post-Election Street Sentiment: Results Bring Closure & Renewed Focus on Reality

 |  Includes: XLK, XLU
by: First Coverage

Derived from the aggregated analysis of thousands of actual trade ideas and data being sent in real-time from the sell-side to the buy-side, the First Coverage Weekly Street Sentiment provides a snapshot of market trends and a unique perspective of the mindset of the Street for the week ahead. The following data has been extracted directly from all information transmitted in the past week by sell-side representatives from more than 250 firms submitting information to portfolio and asset managers across North America via the First Coverage platform.

First Coverage examined the Sentiment on Wall Street during the first day of trading following Tuesday's historic US presidential election.  First Coverage data from yesterday's trading session showed the following:

  • Overall Sell-Side Sentiment remains strongly bearish.
  • Sell-Side more bullish on Telco, Energy and Technology sectors.
  • Energy boosted by bullish shift on Alternative Energy.
  • Sell Side more bearish on Utilities, Basic Materials, Food & Drug Retailers and Media.

While there were pockets of the market that reacted to the news of Obama's election, the truth is most of the market had already moved on to a renewed focus on bigger economic issues. First Coverage's data shows the biggest thing the election did was let the market re-focus back on the economy, the earnings and other pressing issues – all bad – and that this is what drove the market to its largest fall ever after a national election.

While there was no dramatic bearish or bullish shift in Overall Market Sentiment, First Coverage's information did reflect that the election of Obama resulted in investors becoming more bullish in areas such as Telco, Energy and Technology. At the industry level, we can see why Energy popped as a real bullishness on Alternative Energy marked the only real significant shift in Sentiment.

The bump in Technology could be resulting from the perception that the sector will have an ally in the White House with Obama becoming the first President that is technology friendly. Similarly, the Telco bump could be a reaction to a net-savvy president who will, if the money can be found, move to subsidize expansion of the underlying infrastructure.  At the same time, it is known that Obama favors net neutrality, which makes this a somewhat contrary position for the Sell Side to be taking.

The Sell Side became more bearish on Utilities and Basic Materials, more than likely both a reaction to a renewed focus on a slowing economy after the election has finally passed and an understanding there are no quick solutions under President-Elect Obama. Another area of note on the bearish side is Media. Clearly, a new Democratic administration will appoint a new FCC head, perhaps resulting in tougher ownership rules combined with stricter regulatory requirements on content. All this uncertainty is enough to make this an area where the Sell-Side has begun to suggest their clients take back capital and move it elsewhere.

The following charts help illustrate these examples: