Markets may fear uncertainty more than they like Romney

The conventional wisdom is that investors prefer Republican Presidents, but we would suggest that every election is different. Romney’s plans would tax equities more favourably and lighten the burden of regulation on the energy sector. Nonetheless, the margin of victory and the outcome of the elections for Congress will matter too, especially in dealing with the more immediate dangers posed by the “fiscal cliff”. Any boost from Romney’s pro-business stance would also need to be weighed against the additional uncertainty that might be created by more aggressive policies towards China or Iran, although we would expect him to move quickly to ease fears of a change in tack at the Fed.