US Likely to Remain Deeply Indebted for 4 Years

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US Likely to Remain Deeply Indebted for 4 Years

US Likely to Remain Deeply Indebted for 4 Years



So President Obama has been given another four years to complete his vision of change, which many would argue hasn't even started yet.

Whilst almost half of Americans may not have actually voted for him, in the end it looks like it could be a much bigger win than expected.

It will certainly make those bookmakers who paid out early on an Obama win sit more comfortably.

The main thing from the market's perspective is that the results are clear, meaning that there's no uncertainty for online spread betting investors.

The next major hurdle is, as we well know, the US fiscal cliff. Negotiations are likely to be hard fought and the issue will probably dominate the headlines for the remainder of the year.

Whether we see a 'fiscal bridge' or an actual agreement on which fiscal measures to impose is yet to be seen. The heat of the debate will be determined by the shape of Congress as the House of Representatives keeps its Republican majority.

We can safely say that Ben Bernanke will be keeping his job, meaning that we are more likely to see additional QE.

As a result, gold prices have spiked dramatically and risk assets are seeing strength pretty much across the board this morning.

Last night, we saw investors slowly but surely coming to terms with the incumbent's victory as the Dow Jones rallied 130 points to reach 13,245.

Whether this strength marks the start of a year end rally remains to be seen as plenty of headwinds remain.

After his first four years, we can now attempt to guess what the US will look like at the end of Obama's second term in office.

It seems likely that the country will remain as deeply in debt as it is today, if not more so, and we will probably not see a big boom in the economy as the private sector and consumers continue to deleverage.

As mentioned, the first hurdle is to tackle the fiscal cliff so that those businesses which have reined in investment can be sure of what lies ahead in 2013 and start spending again.

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By Simon Denham, 7 November 2012


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