Fisher on the Dem Bounce

In his latest Forbes column, Kenneth Fisher offers one interesting reason why he thinks stocks are a good bet to end the year in positive territory. According to Fisher, since 1926, the market has posted double-digit gains in the first year of a new Democratic president’s tenure five out of six times. Conversely, the market has been negative in the first year of a Republican president’s tenure five of six times.

It may sound like simple trivia, but Fisher says there’s reason behind it: “The pattern is not so strange when you think about what the market is and is not.” he says. “It is not a register of current business conditions. It is an anticipator. Anticipating the worst from a populist presidential candidate, Wall Street marks down stocks before a Democrat takes office — before, in fact, he is even elected. After the inauguration there’s a good chance for a rebound.

“With Democratic politicians the big fear is about how antibusiness and anticapitalist they will be,” Fisher continues. “Obama says lots of stupid, scary things. That fear hit markets early in the election cycle. But once he is in office the overwhelming motivation of a left-of-center President slowly morphs toward getting reelected. Achieving that means pandering more to the independent voters and liberal Republicans, less to the Democratic power base. Obama’s concern now is the recession and the job creators that can take us out of it. That means slowly backing off soak-the-rich, anticorporate talk over time.

“The reverse happens with Republicans. They come in riding high expectations for pro-business, pro-growth policies–and inevitably disappoint investors as they drift away from their power base. Optimism fades, depressing stocks.”

Fisher says he’s focusing on four areas right now: consumer discretionary, materials, energy, and industrials. And he’s particularly high on Harley-Davidson (HOG), Mattel (MAT), Halliburton (HAL), Owens-Illinois (OI), and Parker-Hannifin (PH).

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