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Fiscal cliff lurks menacingly over Obama's victory

‘I’m thinking of buying a hospital’ says one fund manager as investors pick over the winners and losers from Barack Obama's victory.

 

Some investors say it just doesn’t matter that much for equity markets who won the election, pointing instead to fundamentals, which include a growing conviction that the US economy is recovering. ‘While markets may be volatile post-election, we believe that over the longer term, US equities will gain support from the fundamental strengths of the economy,’ said Cormac Weldon, who manages the Threadneedle American Select fund.

However, monetary policy, and hence bond prices, could perhaps have changed under Romney, who had pledged to replace US Federal Reserve chairman Ben Bernanke, under whose leadership the central bank has committed to keep monetary policy loose.

'The key investment conclusion is more US quantitative easing,' said Artemis fund manager Simon Edelsten. 'In the Global Select Fund , we have added to our US bank holdings, Wells Fargo, Suntrust and PNC, where Federal purchases of distressed mortgage assets lower banking risk,' he added.

David Leduc, the A-rated bond fund manager of the BNY Mellon Global Strategic Bond fund, said Obama’s extended stay in the White House would be ‘a mild negative’ for riskier assets. ‘However, we do not see this changing much given that US fiscal cliff resolution remains an open question. As such, we do not expect to change our current strategy based on these results.’

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3 comments so far. Why not have your say?

joe stalin

Nov 07, 2012 at 14:51

Well it does not look like it does it?The fiscal cliff is now the wall of worry the financial mediais going to batter us all to death with over the next couple of months. Like the armagedon scenarios followed by tsunamis this too will become a non event. Obama dis not so much succeed to get another mandate to continue his visionary work rather than the Republicans failed to get a candidate capable of withstanding scrutiny under heavy mudslinging by the democratic camp. end of. As you point out the global economy is showing sings of recovering and that includes the US. The politicians wil come up with a compromise but even if we drive over the edge if past nightmare scenarios are to go by it will be a damp squib. Look beyond the bond market Casandras' squeeling.

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Geoff Downs

Nov 07, 2012 at 15:52

The global economy is not recovering, don't buy the hype.

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Nigel Harris

Nov 10, 2012 at 10:22

Quote: "Kelly said investors might be tempted to sit on cash until a deal is reached. ‘If the US gets past the fiscal cliff issue and past the uncertainty caused by the election it makes US stocks look pretty attract relative to equities across the world.’"

But are developed markets really attractive relative to the emerging/developing markets. The demographics of mature economies lean towards more retirees who spend less, and fewer jobs for younger workers. Does not the opposite apply to the emerging/developing economies?

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