By Matt Jarzemsky

Strategists expect a rocky few weeks for stocks, as investors' attention turns to whether a divided government can address fiscal-policy issues by the year's end.

Economists have said falling off the "fiscal cliff"--more than $600 billion in federal tax increases and spending cuts set to kick in if lawmakers can't reach a deal to avoid them by the end of the year--could send the U.S. back into recession. For some stock investors, the challenge recalls last year's budget fight, which led Standard & Poor's Ratings Services to downgrade the U.S. credit rating and set off wild swings in stock prices.

"Obama gets to say now, 'I campaigned on raising taxes, and I won,' " said Dan Greenhaus, chief global strategist at BTIG LLC. "That complicates things when you have a Republican House [of Representatives] that sees things differently."

Mr. Greenhaus said that, when it comes to his expectation for stocks' direction in the coming weeks, "the easy answer is, 'Down.'"

Stocks sold off Wednesday, sending the Dow Jones Industrial Average 267 points lower in early-afternoon trading. The rout pared major benchmarks' gains for the year. So far in 2012, the Dow is up 6.2% and the Standard & Poor's 500-stock index has climbed 11%.

"There is broad agreement that there will be volatility associated with conflict over the fiscal cliff, and I think there's a lot of pessimism about the ability of Washington to come to an agreement," said David Kelly, J.P. Morgan Funds' chief global strategist.

To be sure, not all market watchers expect stocks to continue to fall. As of the end of last month, Wall Street strategists, on average, expected the S&P 500 to rise to 1411, according to a Birinyi Associates survey. That is a little above the index's 1401 level Wednesday afternoon but would amount to a gain of 12% for 2012.

J.P. Morgan Funds' Mr. Kelly expects politicians to reach an agreement by early next year, he said. He sees stocks as offering better prospects for returns than bonds, given their still-modest price relative to earnings.

"For investors, the important thing is, just don't get caught up in the day-to-day," Mr. Kelly added. "Don't try to play the waves when you know which way the tide is going."

The undercurrents of Wednesday's selloff reflected investors' take on winners and losers after the election, strategists said.

Shares of coal companies, thought to benefit from a Romney victory, tumbled. Peabody Energy Corp. (BTU), the largest U.S. coal producer by output, fell 9.2% in early-afternoon trading.

The Market Vectors-Coal exchange-traded fund (KOL), which tracks the sector, tumbled 5.5%, putting it on pace for its biggest drop since November. Coal stocks had rallied on Oct. 4 after Mr. Romney said in a debate he would "make sure we can continue to burn clean coal."

Some corners of the health-care industry also gained amid reassurance that President Obama's signature health-care overhaul would stand. HCA Holdings Inc. (HCA), the biggest for-profit hospital operator, jumped 8.8%. Hospitals are expected to benefit from rules that would lead to coverage for more Americans.

Financial shares in the S&P 500 saw the biggest decline among the index's 10 sectors, as hopes for less burdensome regulation under Mr. Romney dissipated.

Write to Matt Jarzemsky at matthew.jarzemsky@dowjones.com

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