Overseas investors, many of whom are creditors to the highly-indebted U.S. government, reckon a re-election of President Barack Obama would be best for world markets even if U.S. counterparts say otherwise.
For the second month in a row, Reuters' monthly survey of top fund managers around the world was evenly split when asked whether a win for incumbent Democrat Barack Obama or Republican hopeful Mitt Romney in the Nov. 6 presidential poll would be good for global markets.
The split was clearly dependant on whether the asset manager was based in the United States or not. Domestic funds, by and large, tend to favour Romney; overseas investors Obama.
Given the outside perception of the contest in Europe at least, where surveys by pollster YouGov on Wednesday showed fewer than 10 percent of Europeans would vote for Romney if given the choice, that may not be terribly surprising.
But that shouldn't necessarily explain why supposedly hard- nosed money managers would think an Obama re-election would be better for their portfolios.
So is there a something other that regional political sensibilities behind the difference of investor views?
Franco-Belgian Dexia Asset Management, for example, cited long-term uncertainty of a radical U.S. policy shift in such febrile economic times.
"(Romney's) election could lead to more political and economic uncertainties over the longer term as he would implement an ambitious tax reform, huge spending cuts, a tax plan favourable to the highest income based on a too-optimistic growth scenario that would produce uncertain effects on growth," it said in response to this week's Reuters poll.
Yet, the shorter term picture is very different. Financial market commentary across the world seems to have converged on an loose assumption that a Romney victory would be good for stocks and an Obama reelection good for bonds.
The thinking goes along the lines that Romney would dodge the "fiscal cliff" more easily by allying with a Republican House of Representatives to retain or introduce more tax cuts on business and the wealthy while slashing government spending.
By removing the fiscal uncertainty with a pro-business tilt, it is argued, corporate planning will resume with gusto and lead to a surge in pent-up capital expenditure and retail spending, a macro growth fillip and a resulting slipstream for stock prices.
Flip all that around for Obama. A deeper political divide on taxes and spending between the White House and Congress could see at least a temporary fall off the cliff, stalling growth for a period and boosting safe-haven bonds.
Monetary arguments reinforce that bond picture. A Romney team sceptical of hyper-active Federal Reserve stimuli would be unlikely to renominate Fed chief Ben Bernanke for a third term in 2014.
It would opt for more hawkish, inflation-focussed chairman than a Obama-led White House.
There are dozens of caveats, ifs and buts on all that -- but it's the broad theme most strategists seem to be working off.
So, would that in itself explain the geographical divide in views?
In other words, is greater investor enthusiasm for an Obama re-election overseas partly rooted in foreign funds owning disproportionately more U.S. bonds relative to equity than domestic U.S. counterparts?
EQUITY OR BOND PRISM?
To test that, a snapshot from ThomsonReuters' fund-tracker Lipper on mutual funds' U.S. asset holdings suggests not.
The Lipper universe shows that while there are about 7,000 domestic U.S. equity funds with some $2 trillion invested in stocks, there are also about 5,000 domestic dollar bond funds with total assets of about $1.5 trillion.
While there are about 2,000 fewer non-domiciled U.S. equity funds, there is less than half as many overseas dollar bond funds and total assets in the latter only amount to about $150 billion.
But the picture changes when you consider the behaviour of the much bigger pension fund industry and also take into account overall bond and equity worldwide -- most of which would be sensitive anyway to gyrations on Wall Street assets.
On that score, the overseas sensitivity to bond outcomes becomes clearer and may help explain a pro-Obama leaning.
Data from consultants TowersWatson shows that at the end of last year more than $26 trillion of pension fund assets from the seven countries with the biggest private pension pots held more bonds than equity -- 41 percent to 37 percent.
And that number is skewed in favour of equity by U.S., UK and Australian pension funds -- who hold between 44 and 50 percent of portfolios in stocks.
The lion's share of other pension portfolios is in debt markets -- with Dutch and Japanese funds, for example, holding close to 60 percent in bonds.
Although not in the survey, German, French and Italian pension funds are likely to be similarly bond heavy.
And that's just private sector investors. While some 50 percent of up to $5 trillion of assets held sovereign wealth funds are estimated to be in equities, the vast bulk of the $10.5 trillion held in global central bank reserves is in fixed income and about two thirds of that in dollar bonds.
An offsetting factor may be that Romney's policy leanings -- tighter fiscal and monetary policy over time and a pro-oil, Wall Street and business growth -- would buoy the dollar.
"We suspect the Republican policy mix would be more positive for the U.S. dollar in the medium term," ING strategist Chris Turner told clients this week.
Given that overseas investors are exposed to dollar moves in a way domestic funds are not, that should be reassuring.
On the other hand, Romney's pledge to label China a currency manipulator and his likely desire to boost U.S. exporters' selling power as much as Obama may counteract that view.
For some foreign investors, just sticking with status quo tends to be better for markets in the short run but, yet again, the picture is far from clear cut.
"Using history as a guide suggests risky assets tend to favour an incumbent win," said Elke Speidel-Walz, strategist at Deutsche Bank Private Wealth Management. "In contrast, the year after election day, risky assets tend to favour the challenger winning as the market gets more comfortable."
Put together with the various permutations of possible outcomes in the congressional polls, the split in fund views and the tightness of the race and it's easier to understand the reluctance to take a firm market position ahead of Tuesday.
The risk is that with neither outcome effectively priced into world markets already, the reaction on the clear outcome could be all the more dramatic.
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