Wall Street Betting on Romney Win

(Newsroom America) -- While the presidential election is still months away, Wall Street seems to have already picked presumptive GOP presidential nominee Mitt Romney, based on recent investment trends and data.

"One analysis concludes that last week's sharp three-day market surge can only mean that Wall Street is banking on a victory from Republican Mitt Romney," CNBC.com reported.

Morgan Stanley chief U.S. equity strategist Adam S. Parker, the financial newswire reported, said that's the only logical conclusion to draw from a rally that should otherwise result in a sell-off in an analysis asserting there's no other reason to like stocks now other than a Romney victory.

"The problem is that it’s impossible to be bullish and right for the right reasons," Parker said in a note to clients.

"Nearly every day someone expresses surprise that our base case is for the equity market to be down by 10-15 percent. Why is this so hard to believe? The market has had eight 10 percent down moves in the last 12 years," he said. "We think a better question is why more people don’t forecast that the next 10-15 percent move is down than up?"

Those factors, and others, have led Parker to conclude that investors believe Romney will defeat President Obama and thus bring a more business-friendly environment to the White House.

"At the end of the day, we are not really worried that Europe is going to be 'solved' or that its economy will strongly grow. We also don’t think strong corporate profitability relative to expectations will save the day," he wrote.

"To us, the biggest bull case for US equities is based on the huge cash balances and the potential belief that they will be more actively and productively deployed. The biggest possibility here would be Romney winning the presidential election."

Historically, however, that hasn't been the case. Usually, moves higher in the market point to an incumbent win.

But, CNBC.com noted, markets tend to go their own way.

"Many investors I have spoken with believe that if the S&P 500 should rise between July 31 and Oct. 31, it would signal an impending Romney victory," Sam Stovall, chief equity strategist at S&P, told the newswire service.

"The recovering market would be a sign that the perceived anti-Wall Street policies of the current administration will soon come to an end, as the incumbent would be replaced and that a plurality on the Potomac might even return as a result of the early November outcome," he said. "Unfortunately for these presumptive prognosticators, history indicates, but does not guarantee, that the opposite has usually been true."

Recent polls have the presidential race nearly even.

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