The pollsters are anticipating a tight race, and while TheStreet is predicting the incumbent will prevail, just getting the vote out of the way may be enough to shake equities loose of their recent doldrums.
"We expect a relief rally could develop after the election to celebrate the outcome of the election regardless of which party wins," wrote Oppenheimer chief market strategist John Stoltzfus in emailed commentary on Monday. "The elimination of investor hesitancy to take actions ahead of the election should be positive for the market near term. Beyond the election, of course, lies the fiscal cliff and the need for constructive near-term action. Stay tuned."
The conventional wisdom, however, seems to think that Wall Street would look more favorably on a victory by Republican candidate Mitt Romney but Julian Jessop, chief global economist at Capital Economics pointed out that there are cons to go with the obvious pro-business pros of the former buyout king ending up in the White House."Mitt Romney's plans would tax equities more favourably and lighten the burden of regulation on the energy sector," he said. "Nonetheless, the margin of victory and the outcome of the elections for Congress will matter too, especially in dealing with the more immediate dangers posed by the 'fiscal cliff.' Any boost from Romney's pro-business stance would also need to be weighed against the additional uncertainty that might be created by more aggressive policies towards China or Iran, although we would expect him to move quickly to ease fears of a change in tack at the Fed." Jessop said what happens in Congress could end up being "pivotal." "The Republicans currently have a large majority in the House of Representatives, while the Democrats control the Senate albeit only by a slim margin," he said. "A Republican clean-sweep is therefore possible and would clearly be the preferred outcome in equity markets." The most likely scenario, Jessop said, is that Congress will remain divided, and if that happens, the margin of victory for winner of the presidential election will come into play, determining what kind of mandate Obama or Romney is perceived as having when engaging in inevitable tussles with a split Congress.
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