Obama Wins Election

Market Comment

Barack Obama has been re-elected as President of the United States, the Senate was won by the Democrats while Congress remains in Republican control. After all is said and done, the status-quo remains with no change in the balance of power on Capitol Hill; however, markets are trading lower this morning as risk appetite takes a dive.

Goldman Sachs celebrated Obama’s re-election by cutting US Q4 GDP to 1.5% from 1.9%, citing the fiscal cliff and expiration of the Bush tax cuts at the end of the year which many fear will plunge the US economy into a double-dip recession in the first half of 2013.

The EUR/USD was all over the map overnight: the election results have softened the US Dollar while comments from ECB President Mario Draghi caused the Euro to fall 100 basis points against the greenback, a 2 month low. Draghi commented that the debt crisis is beginning to weigh on the German economy, perfect timing given Germany’s release this morning of industrial production down 1.8% (consensus of -0.4%).

US equity futures are pointing towards a -1% open this morning while the TSX is down 0.65%. Gold and Silver surged 2-3% overnight on inflation risk after the election leaves Fed Chairman Ben Bernanke at the helm of the US Dollar printing press. Crude Oil is down on risk aversion, falling over 2% to $86.65/bbl. Oddly enough, the only asset largely unchanged is the USD/CAD.