Given the candidates’ distinctly different economic proposals and the potential shift in Congress’ balance of power, the upcoming election may indeed result in an outsized impact on the markets.
Historically, U.S. presidential election years have been associated with positive equity returns.
On corporate taxes, both candidates propose rate reductions, although Romney’s proposed rate would be lower and includes the elimination of the tax on foreign earnings.
The typical rally that follows a close election generally favors domestic cyclicals: Information Technology, Financials, Consumer Discretionary and Industrials.
In the brief timespan between election day and New Year’s, a lame-duck session of Congress will be left with the Herculean task of coming up with a solution to avoid an immediate estimated 3.5% hit to the GDP.