In his victory speech, Obama said: “I return to the White House more determined and more inspired than ever about the work there is to do and the future that lies ahead.”
Obama’s Democrats has held onto control of the Senate while the Republicans retained the House of Representatives, which could lead to further gridlock in the country’s policy making.
Asset allocators have reacted to the election results, with their views highlighting the immediate challenge created by the looming fiscal cliff and the risk stemming from a deadlocked Congress.
Valentijn van Nieuwenhuijzen, head of strategy at ING Investment Management
“The combination of an Obama win and divided Congress was our and the market’s base case expectation and is therefore not expected to have a major impact on market sentiment.
“It does take away some uncertainty (risk of a dead heat and legal challenges, future of Fed policy under Romney), but keeps the uncertainty over the fiscal cliff negotiations later this year very much alive.”
Cormac Weldon, head of US equities at Threadneedle Investments
“Despite the electoral rhetoric, Obama knows that his scope for manoeuvre in the face of the ‘fiscal cliff’ and the budget deficit is limited. He has little choice but to address these challenges (as would a President Romney) by raising taxes and cutting spending.”
Julian Chillingworth, chief investment officer at Rathbone Unit Trust Management
“For president Obama, there’s still no sleep as he faces a Congress where the Republicans have gained ascendency, many with a mandate to block any tax rises. The market’s biggest fear is this sort of prolonged gridlock.”
Dan Morris, global strategist at JP Morgan Asset Management
“The fiscal cliff may turn out to be just a distraction. If just a short-term solution is found to the problem, markets should recover fairly quickly. If tough negotiations lead to a drop in equity markets that should be viewed as a buying opportunity.”
Richard Lewis, head of global equities at Fidelity Worldwide Investment
“On the basis that the US election has resulted in status quo in the White House and in Congress, politicians on both sides should now get on with resolving the issue of the budget deficit reduction. With the balance of power remaining the same, there is no excuse for delay.”
Nick Cowley, co-manager of the Henderson Horizon American Equity Fund
“Obama’s victory does provide stability, particularly with respect to the Federal Reserve, and thus the risk of Romney meddling with Ben Bernanke’s loose monetary policy can now be eliminated.”
Gary Dugan, chief investment officer for Asia and Middle East at Coutts
“The immediate reaction to US President Barack Obama winning a second term has been a modest rally in equities and broad weakness in the dollar.
“The latter probably reflects a consensus view that the Fed is more likely to keep monetary policy looser for longer under a second Obama administration than would have been the case under Republican rival Mitt Romney.
“US equities may continue to rally, assuming the lack of reaction to recent strong economic data was due at least in part to uncertainty over the election result.”
Mike Turner, head of global strategy and asset allocation At Aberdeen Asset Management
"The global economy needs the US to recover. Despite China’s emergence, America remains key to the financial health of economies around the world. Stock markets may react positively to president Obama’s re-election as it offers continuity (particularly in the Federal Reserve) and reduces uncertainty.
“However, longer term all eyes will be on whether the president can address the country’s debt problems, restore business confidence and provide the seeds for growth. All big challenges."
