Tuesday saw America’s most anticipated moment of 2012 fly by with little more than a hiccup. Sitting in a hotel in Atlanta, I watched a Romney supporter brave the driving rain in a last-ditch effort to sway Democrats and coax non-voters to the polling booths. While the popular vote was reasonably close (50% – 48%), the incumbent President breezed to victory in many of America’s ‘swing’ states, in line with most predictions.
Wall Street wasted no time getting back to business. The Dow Jones Industrial Average shed 300-points in post-election trade as the focus quickly returned to the pressing tasks at hand. The American fiscal cliff looms, with Bush-era tax cuts due to expire and a fragile economy at the top of global investors’ concerns, alongside struggling EU performance. America’s pressing concerns were temporarily set aside, thanks to a record $6 billion in electoral campaign spending. This preposterous sum is rather ironic considering America’s dire debt position.
With the election now out of the way, a major risk factor is off the table. Nevertheless, on Wednesday the markets reminded Americans of their looming deadlines, which should now be the top priority of government. The Dow opened lower after Fitch Ratings warned that the US would lose its AAA-credit rating if they failed to address tax increases, spending cuts and the fast approaching debt ceiling, casting a shadow over the prospect of another four-year Obama presidency. It seems the markets hadn’t completely factored-in the likely Democratic win. Every major sector was in negative territory as markets contemplated what lies ahead. Taxes across the board are likely to rise, starting with capital gains, dividends and just about every other aspect associated with positive growth in the US share market. Stocks will likely suffer further.
America has some very big decisions to make and the country faces immediate challenges from rising tax rates and a potential recession. The best one can hope is that Democrats and especially hitherto obstructionist Republicans learn to ‘play nice’ and develop a bipartisan strategy to benefit the country. The battle to win the hearts and minds of the nation is over. Religious, cultural and political differences must be put aside so the policies that are needed to save this economy can be enacted. The US isn’t out of the woods yet.