Cliffhanger looms for presidential battlers

As the US election draws ever nearer it is becoming increasingly impossible to avoid the hype that surrounds it. After months of advertising campaigns belittling each other’s policies, Barack Obama and Mitt Romney are now slugging it out on the debate stage in a monumental effort to win over the so-called swing states.

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The countdown is now on to the 6 November election date and no doubt in the weeks to come masses of material will be released on the possible impacts on markets and economies for whichever candidate wins the race to the White House.

This week’s cover story by Vanessa Drucker in New York closely examines the implications for investors, with the author noting this is the first election for some time where the two candidates have been articulating such clear differences in their views.

Drucker looks at the possible impact on certain stocks and sectors of a win for either the Democrats or Republicans. For example, US dividend-paying stocks such as Philip Morris or Procter & Gamble could be hit hard by an Obama win, given his stance on dividend payments for the wealthy.

Meanwhile, Romney has made it clear that he favours a tighter monetary policy, which could lead to diminishing economic growth over the short term.

In terms of sectors, Drucker notes that the defence industry would favour a Republican triumph because the party is more attuned to increasing military spending.

Addressing the country’s fiscal cliff is likely to be be one of the winner’s chief concerns as fears grow over its impact on both the US economy and global stockmarkets.

Indeed October’s Bank of America Merrill Lynch fund manager survey revealed that 72 per cent of respondents did not believe the fiscal cliff was substantially priced into global equities and macroeconomic data. It was further identified as the number one tail risk by 42 per cent of managers, increasing from 35 per cent in September.

The economy has been a key battleground in this presidential election and directly addressing these issues rather than belittling each other with negative advertising could be enough to swing the electorate.