Friday, 19 October 2012

Week in review, part II: The politics stupid!

While Morgan Stanley’s strength weakened its profits, dichotomous contradictions also stalked the world of politics. In Italy a series of political scandals, including the embezzlement of party funds by local politicians and the buying of votes from the mafia. These scandals have had the effect of diminishing the chances of a conclusive result at elections which must be held by April 2013. Meanwhile, to combat such moves, the current unelected Prime Minister, Mario Monti has introduced legislation to create an anti-corruption ministry. That kind of progressiveness is what makes most of Europe hope Mr Monti will end up serving a second term. With Silvio Berlusconi’s People of Freedom party implicated in many of the political scandals, that wish seems ever more likely to come true.
Source: Intrade/Brewin Dolphin
In the near term, however, everyone is watching the US election and, after a better performance at the second Presidential debate, President Obama has stemmed the loss of ground he had been suffering against Governor Romney. Many polls continue to show Romney slightly ahead following his strong performance in the first debate. In the race for the 270 Electoral College votes that will secure the White House, however, it is Romney who seems to have the ground to make up. Obama is 28 firm votes ahead and has marginal leads in a further 47. Romney will need to win the 22 tied votes and 13 in which Obama is currently leading. The odds, as indicated Intrade’s presidential betting, continue to suggest four more years for Obama.
Source: Intrade/Brewin Dolphin

What matters perhaps as much as the President is the control of Congress. There are contrasting tales to be told here; the House of Representatives is virtually guaranteed to remain under Republican control whereas the Senate hangs far more in the balance.

Source: Intrade/Brewin Dolphin

Far more important than the actual results however is whether the either party is likely to win a strong enough majority in both houses to pursue its ideological agenda. While the chance of a clean sweep by the Republicans looks remote, and one by the Democrats looks non-existent, both parties are deciding what concessions to make in order to avoid sending the economy careering over the fiscal cliff. 

Guy Foster
Head of Portfolio Strategy

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