The US Presidential Election and the Financial Markets

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The US Presidential Election and the Financial Markets

The US Presidential Election and the Financial Markets



It now looks like the US Presidential election is going to be a closer fought competition than many had previously thought.

Romney has managed to get his nose ahead in many of the important polls, some by a couple of points in the swing states, which is really putting the pressure on the Obama camp.

What was unthinkable only a few weeks ago is becoming a much more distinct possibility; we could see a Republican President back in the White House come the New Year.

This would bring mixed blessings and a large bout of uncertainty as to just how much Romney wants to scale back the size of the bloated state.

It's amazing what one television debate can do for your election prospects, just as we saw when Nick Clegg was propelled to popularity after the first UK electoral debates.

This means that tomorrow's second debate between the two Presidential candidates will be vitally important. If Obama performs as badly as he did in the first debate, where he looked like he didn't even want to be running, you've got to say he's on his way out.

A new President would throw up all sorts of questions but, most importantly for the stock markets, what would Romney do to prevent a possible US recession?

The Republicans have plans to replace Ben Bernanke and change the way the Fed is undertaking monetary policy. They would also want to undertake a big review of state spending; something which always seems to mean spending cuts.

As a result, if Romney were to win, there may actually be a sell-off in risk assets due to the unknowns of such a result.

For now though, the markets seem to be concentrating on other things, particularly the US earnings season.

By Simon Denham - 15 October 2012


US Presidential election - Part 2

Update - 17 October 2012

Well it looks like Obama found his voice last night and the race to the White House is heating up.

It couldn't be a closer race, probably neck and neck as things stand, but there's a feeling that the Romney momentum may be enough to drag him over the line.

It's still far too early to be sure, and next week will see the potentially game-changing final debate on foreign policy. This is an important issue for Americans as it will allow those undecided voters to choose who they want to be their Commander-in-Chief.

For the financial markets however, it is still unclear just what a Romney victory would mean for the US economy.

At least with Obama you know what you are going to get, i.e. more of the same. As a result, it's a bit of a leap of faith for the swing voters to go down the Republican route.

The greatest threat that Romney poses is swingeing cuts to government spending that would tip the world's biggest economy back into recession.

It is this uncertainty which may well see a negative reaction from the spread betting markets if Romney does manage to win.

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By Simon Denham, 15 October 2012


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