Some thoughts on tonight’s U.S. Presidential election race

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Will it be Republican Mitt Romney or Democrat Barack Obama who are victorious in today’s U.S. Presidential election and find themselves in the White house? Its neck and neck, so it looks like the result could go either way. 

For investors, there’s a few things to think about. Whoever wins, the new President will have the “fiscal cliff” to deal with at the beginning of next year with a raft of tax breaks for U.S. citizens and businesses coming to an end, which unchecked could stifle economic recovery and impact GDP by 2-4%. With the House of Representatives currently in Republican hands but with all the 435 seats being contested today as well as around a third of the Senate, it could make Romney’s job easier in avoiding the cliff, if the Deomcrat majority in the Senate can be overturned and seats in Congress increased. And vice versa of course. 

Romney has also talked of his intentions to cut taxes and privatize the health system Medicare whilst also declaring China a currency manipulator, potentially triggering a trade war. 

The Federal Reserve and Ben Bernanke have been rather accommodating of late in easing monetary policy and pouring billions into quantitative easing. This isn’t likely to change soon for either Obama or Romney, but Mitt may be rather more forceful in seeking less of an interventionist central bank policy. However, if U.S. growth goes back on the decline, Romney like Obama may be needing all the help he can get from the Fed’s printing presses!

Should be an interesting night for election watchers!

Contrarian Investor UK

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