{"id":33133,"date":"2012-10-25T21:45:15","date_gmt":"2012-10-26T01:45:15","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/10\/why-romney-has-us-investors-rattled\/"},"modified":"2012-10-25T21:45:15","modified_gmt":"2012-10-26T01:45:15","slug":"why-romney-has-us-investors-rattled","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/10\/25\/why-romney-has-us-investors-rattled\/","title":{"rendered":"Why Romney Has US Investors Rattled"},"content":{"rendered":"

By MoneyMorning.com.au<\/a><\/strong><\/p>\n

This may sound a little controversial, particularly if you have been taking sides in the US election. But hear me out.<\/p>\n

The latest wobbles in the US stock markets<\/a> aren\u2019t all about disappointing corporate results.<\/p>\n

Sure, signs of a slowing global economy are unnerving investors. But results haven\u2019t been that atrocious. And you\u2019d have to be wilfully ignorant not to have noticed that China is slowing down by now.<\/p>\n

No, the jitters are mainly down to one thing.<\/p>\n

Investors in the US are suddenly scared that Mitt Romney<\/strong> might win the election\u2026<\/p>\n

<\/span><\/p>\n

A Month is a Very Long Time in Politics<\/h2>\n

A month or so ago, it looked like Barack Obama had a reasonably easy ride towards reclaiming the presidency. The bookies \u2013 the only people you can have any real faith in as they\u2019re actually putting money at stake – were all backing the incumbent to romp home with the prize.<\/p>\n

Three televised debates later, it looks like anyone\u2019s game. Many polls have Romney as the winner, and even the bookies are no longer as \u2018long\u2019 Obama as they were before.<\/p>\n

If you look at betting website Intrade, Obama\u2019s odds of winning have plunged over the past month or so. He\u2019s still the favourite, but by nowhere near as much.<\/p>\n

Now, let me make one thing clear here in case you\u2019re in any doubt: I have no drum to bang for either candidate. This isn\u2019t a political statement.<\/p>\n

Quite apart from the fact that I can\u2019t vote in the US election, and don\u2019t really feel very strongly about it, neither of the candidates seems terribly impressive.<\/p>\n

Obama has spent most of his time cheerfully pandering to Wall Street while pushing through his pet healthcare plan.<\/p>\n

As for Romney<\/a>, it\u2019s hard to trust a man who can change his views so readily to fit his audience. He\u2019s unusually adept at that, even by politicians\u2019 standards.<\/p>\n

So, in short, I don\u2019t really care who wins. But Wall Street does.<\/p>\n

Romney: A \u201chard money\u201d Kind of Guy?<\/h2>\n

There are few definitive differences between the candidates as yet. As Julian Jessop of Capital Economics notes, neither has spelt out \u2018a detailed manifesto.\u2019 Their policy statements so far \u2018are of the \u201cmotherhood and apple pie\u201d variety \u2013 hard to disagree with but lacking any real substance.\u2019<\/p>\n

Yet, as private bank Lombard Odier points out in its latest bulletin, investors seem to have got it into their heads that Romney is a \u201chard money\u201d kind of guy. Or at least, he\u2019s less of a \u201csoft money\u201d kind of guy than Obama is.<\/p>\n

He threatened earlier this year to ditch Ben Bernanke as head of the Federal Reserve, for example.<\/p>\n

Lombard Odier is sceptical about the ability of quantitative easing (QE) to boost the \u201creal\u201d economy. But QE does \u2018affect asset prices.\u2019 So if Romney wins<\/a>, and somehow stops the money-printing, \u2018that could trigger a collapse of overvalued and liquidity-addicted US equities.\u2019<\/p>\n

Of course, there are a lot of \u201cifs\u201d between now and that particular outcome. For a start, Romney has to win. Secondly, he\u2019d have to follow through on his promise not to reappoint Bernanke in 2014, when his job is up for renewal.<\/p>\n

(Although it seems Bernanke may not even want a third term in any case). Finally, whoever took over from Bernanke would have to be \u2018less aggressive in his monetary policy\u2019.<\/p>\n

None of this is all that likely. After all, Bernanke was no less of a money-printer than his predecessor Alan Greenspan. Whoever follows Bernanke is likely to follow the same methods.<\/p>\n

But that\u2019s not to say a change couldn\u2019t happen.<\/p>\n

And then there\u2019s this infamous fiscal cliff. As Jessop notes, \u2018The Republicans have a large majority in the House while the Democrats control the Senate.<\/p>\n

A Republican clean-sweep is possible but it is more likely that Congress will remain divided, which would limit any President\u2019s room for manoeuvre.\u2019<\/p>\n

In the face of all this uncertainty, what can an investor do?<\/p>\n

The answer\u2019s simple. Just don\u2019t get involved.<\/p>\n

As we\u2019ve noted already, the US stock market<\/a> is overpriced in any case, regardless of who wins the election. So wait for a better opportunity to buy in. And in the meantime, there are other areas of the world that offer much better value.<\/p>\n

As Lombard Odier puts it, \u2018as long-term investors\u2019 they like cheap regions, such as Europe, \u2018where underlying risks are priced in.\u2019 When it comes to the US, however, \u2018downside is significant and upside is limited.\u2019<\/p>\n

John Stepek<\/strong><\/p>\n

Contributing Editor, Money Morning<\/em><\/strong><\/p>\n

Publisher\u2019s Note<\/em>: This article originally appeared in MoneyWeek<\/a><\/em><\/p>\n

From the Archives…<\/strong><\/em><\/p>\n

Why this Could be the Most Important Day of the Year for the Stock Market<\/a>
\n19-10-2012 – Kris Sayce <\/p>\n

A Back-Door Way to Invest in the Electric Car Industry<\/a>
\n18-10-2012 – Kris Sayce <\/p>\n

The Stock Market is Up, What’s Next?<\/a>
\n17-10-2012 – Murray Dawes <\/p>\n

Debt and Government Spending Means You Should Be Wary of this Stock Market<\/a>
\n16-10-2012 – Greg Canavan <\/p>\n

The Secret Investment to Buy When GDP Falls<\/a>
\n15-10-2012 – Nick Hubble <\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n


\nWhy Romney Has US Investors Rattled <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au This may sound a little controversial, particularly if you have been taking sides in the US election. But hear me out. The latest wobbles in the US stock markets aren\u2019t all about disappointing corporate results. Sure, signs of a slowing global economy are unnerving investors. But results haven\u2019t been that atrocious. And you\u2019d … <\/p>\n

Continue reading “Why Romney Has US Investors Rattled”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-33133","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/33133","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/comments?post=33133"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/33133\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/media?parent=33133"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/categories?post=33133"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/tags?post=33133"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}