US Election most important ever ?
So we’ve arrived at the big day for global politics or have we?
We could be at a political crossroads where this election result could mean more than any in living memory. There are again issues at stake here far, far greater than normal party politics but this time there may be a different approach or at least the attempts of a different approach.
Clearly this might prove to be a red herring and the outcome could easily be a non-event in the fullness of time but there is a possibility that this election could influence the two things that have made the US be one of the few major economies of the developed world to escape a recession or at least one negative quarter of growth over the last 12 months. Basically it all boils down to what the election means for fiscal and monetary policy. The US has so far used both weapons in extremes to tackle this crisis and it has helped them out-perform most of their developed market peers on growth even if this has been the second weakest presidency in terms of growth on record, only behind the 1928-32 electoral cycle. So although the S&P 500 has returned a fairly outsized 59% since last election day largely due to the phenomenal liquidity, the economy has only grown 3.3% in real terms over 4 years and 9.6% in nominal terms. Very weak numbers but ones that could have been much much worse without aggressive intervention. The same might be true going forward for a number of years yet.
Obama probably means more of the same policies. A Romney win probably means an attempt at lower taxes and stimulating businesses but less QE. Whoever wins they still need to stimulate the economy and keep interests as low as possible for some time.
Nigel Green deVere
Blog written on November 6th 2012