Reuters reported today that traders seem more concerned with the impending “fiscal cliff’ faced by the U.S. than the effects a victory for either President Barack Obama or Republican challenger Mitt Romney would have on the markets.
The ‘fiscal cliff,’ a term coined by U.S. Federal Reserve Chairman Ben Bernanke, is a combination of tax hikes and spending cuts that would go into effect on Jan. 1, if Congress cannot agree on a plan to avoid it. The thinking is that without a plan, the U.S. economy will pitched into a debilitating recession.
The newswire noted there is a sense on Wall Street that a win for Romney would help stocks, because of the perception that he is pro-business, and should Obama win, bonds would benefit from his low interest-rate policies.
Whatever the outcome, there is a sense that it will have little effect on the stagnation in Congress. Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey, told Reuters, "Though the resident in the White House may change, the face of Washington is still going to be one of tremendous gridlock, discord and dysfunction, and markets are going to force Washington to come to terms with the dysfunction."
On a low-volume trading day, the Dow Jones industrial average closed up 133.24 points, or 1.02 percent, at 13,245.68, and the the Standard & Poor's 500 Index ended up 11.13 points, or 0.79 percent, at 1,428.39. The Nasdaq Composite Index finished up 12.27 points, or 0.41 percent, at 3,011.93, Reuters reported.
Mitt Romney has vowed to replace Bernanke, should he be elected, while Obama would reappoint him. Nevertheless, Bernanke has reportedly confided in close associates that he does not plan to stay in the position for another term after the current term expires on Jan. 31, 2014.
Early exit polls on Tuesday evening show the candidates to be in a dead heat.
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