Although most economically stable countries have their own stock markets, it is commonly the case that the situation in one will have an effect on the other. The US economy is a huge factor in regards to the global economy, and so it was with baited breath that a lot of economists across the world were watching the outcome of the American presidential election last month. A change of president would undoubtedly mean a change in economic policy; particularly as the state of the country’s economy was one of the hot topics of the election.
The election was expected to be very close, which investors thought could cause the market to fall back. However, Obama actually ended up being re-elected with a clear victory, which led to a boost throughout the various stock exchanges of Europe. Share prices experienced some significant elevations as investors came to terms with the news, and speculated upon what it would mean for the economy. The UK’s FTSE 100 rose by 0.35%, the French CAC 40 increased 0.9% and the German DAX rose by 0.7%.
However, not all investors think that Obama’s victory will be good news for capital markets such as the stock exchange. Although the US markets did open higher than usual the day following the results, some analysts believe that they would have soared much higher had Obama’s opponent, Mitt Romney, won the election. It is thought that the promise of new economic policies would have promoted a more positive outlook for the American economy. The huge deficit which America is currently dealing with is causing concern in the country as economists worry about the fiscal cliff – the term used to describe the extreme cut to the deficit which will be made in early 2013. The expected slash will come as a result of tax increases and extreme cuts to the budget, which will obviously have an effect on many companies in the US stock exchange.
Knowing that the economic policies Obama promised will now be carried into the next presidential term of four years means that investors are in a good position to speculate upon what will happen to share prices. Spread betting is a risky way of investing, and particularly so on the brink of great economic change such as this. However, if one can successfully predict which sort of companies could experience gains and falls over the fiscal cliff (if it happens), then there are big profits to be made.