Stock markets could stabilize after election

Just by having an issue on their agenda, I firmly believe a president can make some industries do better, or some industries do worse.

Q: Obama is ahead of McCain in most polls. Have markets already priced into stocks the gains and losses that certain sectors can expect if Obama wins?

A: I don't think an Obama victory has been priced into any stocks.

When you look at politics, it's kind of unique. I don't think there's the same dynamics you have when everyone is saying, "The Fed is going to lower rates at their next meeting, and it's priced into the market." In this case, people hold onto their candidate to the bitter end, and they gravitate to whatever poll makes their candidate look best.

So I don't think you're seeing what's going on in the polls reflected in the overall market.

Q: If markets rally or tank after the election, how much of those shifts may be the result of the election, versus other factors?

A: That's the $64,000 question that no one is ever able to answer.

If you look at certain industries, and if they move more than the overall market, I would make the case that those differences would be the proof that the election had an impact on that sector. But it's going to be very difficult to prove the psychology behind a market movement.

People whose candidate won are going to assume the whole rally is because their candidate won. But it may have more to do with easing of interest rates outside the United States, or there could be any number of factors.

Q: What are some common myths about the relationship between presidential elections and markets?

Construction on new homes rebounds   Construction of new homes, helped by better weather, rebounded in November following a setback in the previous month.   Consumer prices rise, boosted by energy costs Homebuilder outlook dips despite tax credit Great Recession spawns biz buzzwords Industrial production rises more than expected

A: A lot of people say to me, "Wall Street is in bed with the Republican Party, and always roots for the Republicans." But when you peel back the onion, and look at stock market performance, the market has actually has been up more under Democratic administrations than under Republican administrations.

That sort of pure myth of saying, "All you need is a Republican in the White House, and the market will do well" — that just doesn't hold water when you look into the research.

Another thing that makes election dynamics complicated is that we tend to look at the presidential election in isolation. But it gets so complicated, because what that president can do and can't do is going to be determined by who is going to control the Senate and the House, and then the interplay in those branches of government.

Also in msnbc.com business Your Career: Tips for job hunting during the holidays Frustrated shoppers put credit cards away, pay cash MotorHead: New Audi R8 is a refined land rocket Open House: Homes for sale in a winter wonderland   Video: Retailers, shoppers play cat and mouse with deals

MORE FROM STOCKS & ECONOMY

Stocks & economy Section Front

Stocks move higher after economic data   Construction of new homes rebounds   Inflation stays in check as housing starts rise   Fed may sound upbeat note on economy Bernanke is TIME’s 2009 Person of the Year Poll: Fighting global warming will create jobs Economy points to recovery; inflation looms Industrial production rises more than expected NYT: Poll reveals depth and trauma of joblessness   Oil prices rise despite rise in U.S. inventories Stocks & economy Section Front   Add Stocks & economy headlines to your news reader: