Running in Place

Now what?

After all the politicking and polling and speechifying and caucusing, our national political scene returns to the status quo ante. President Obama is reelected, the House remains Republican, and the Senate remains Democratic. The President won the popular vote as well as the Electoral College count, and even if his election wasn’t the wave that it was in 2008, it was convincing.

So what has changed? For one thing, it’s clear that President Obama now “owns” the economy. In 2009 he took office during an economic swoon brought about by the mortgage bubble and housing collapse. He inherited an economic mess, and most folks were willing to cut him some slack as he tried to find ways to improve the economy. But now any mess he inherits is his own. His current policies are likely to continue, even if some of the personnel change.

Second, this election was decisive. There will be no endless series of lawsuits and appeals. So we can expect decisive action on the “fiscal cliff” that the economy is facing due to the debt-ceiling deal of 2011. Most economists believe that if we see the series of automatic spending cuts and tax hikes that this deal put in place, we will see a recession. No one wants that.

Third, the Republican Party will need to do some soul-searching. In the race for the Senate, establishment candidates lost, tea-partiers lost, well-financed business-people lost. In a weak economy with six Democratic Senators retiring, the Republicans couldn’t pick up any seats. Was it demographics that defeated them? Stupid salesmanship? Or something deeper?

Finally, for those of us who live in swing-states, our phones should stop ringing, at least for a few months. We can all be thankful for that.

Douglas R. Tengdin, CFA
Chief Investment Officer
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