Tuesday, November 6, 2012

US Elections Today - How Will The Markets React

Finally, the day has arrived. The campaigning is over and the battle between the two candidates is over. The war, however, hasn't ended. The next battle will be fought between the voters and it will be they who will decide the fate of the two candidates, President Barrack Obama and Mr. Mitt Romney. As of now, on the eve of the elections, the situation stands that Obama may have a slight advantage over Romney. Now the question is how are we affected as investors by what happens in the US? This post is written just to help us understand the consequences of the US elections.
Most people are of the opinion that the markets will improve if Romney wins and there is a likelihood of a huge decline if Obama wins. The reasons behind that is the fiscal cliff. Thomas Kenny, on About.com, quite clearly explains what the fiscal cliff is and what it could mean for the US economy going forward. Both people, Obama and Romney, have different logic and different plans of action as to how to handle the fiscal cliff. Jean Chua of CNBC explains their ideologies and writes about their plans to handle the fiscal cliff and how it may affect the US economy. Uttara Choudhury on firstpost feels that Romney will cut taxes on capital gains and dividends for both individuals as well as for companies and hence the markets will react positively to a Romney win. Joanna Shatney of The Wall Street Journal wrote last month that the markets may tank if Obama wins whereas if Obama loses, there may be a short-term rally in the markets but then all attention will shift on how the fiscal cliff issue is finally taken care of. She is also of the opinion that getting the elections out of the way will be a positive for the markets no matter who wins. As an old saying goes - "The markets can handle good things and the markets can handle bad things. What the markets can't handle is uncertainty." And elections, "certainly", are uncertain. Statistics, however, show different results. And you'll be surprised to read them. Kevin Mahn, on Advisor Intelligence, has dug out data of how the markets reacted to the election results right from 1900 to the year 2008. And it shows that the market has always reacted positively when the incumbent president has won. You can read the complete report here. The Election process (casting of votes) in America has already started and we now know how important it is for us to know who wins. This link will give you live updates of the elections every few minutes. The US markets have also opened (at the time of writing) and, though with low volumes, are slightly in the green. As far as the commodities markets are concerned, Naveen Mathur of Angel Broking is of the opinion that the commodities markets will react positively if Obama wins and will tank in the case of a Romney win. Please do subscribe to my posts, so that all posts are delivered free to your inbox and you don't miss any useful analysis of the markets in the future. Happy Investing!!!