Debating the ramifications of an Obama or Romney victory in the US presidential election of 6 November has been keeping leader-writers and other media commentators busy but there is an increasing school of thought that the outcome will not make any actual difference to the US economy in the long run.

For starters, there is increasing scepticism that either side will be able to build the political capital necessary to effect real change. Obama had a relatively strong mandate in 2008 but has let the economy drift. Recovery has been tepid, the deficit unaddressed and jobs and housing growth weak. Although Paul Ryan, Romney’s deputy, appears to have some original ideas on the economy, meanwhile, the Republican candidate himself has so far done little to impress with his own economic credentials.

Equally, there are growing doubts politicians even have the tools to bring about change. Globally, economists have said economies need growth – rather than merely austerity – to improve their outlook. Yet no country has achieved it. All the tried-and-tested means of achieving growth, such as tax incentives for small businesses and encouraging banks to lend, have failed to deliver the necessary resurgence in confidence. This is not a failure of one particular government but a failure of government generally. It simply may not have the answers.

Even so, are there differences in the two candidates’ approach? Well, Obama – as more left-leaning – is widely held to be more willing to raise taxes and therefore to allow some measure of ‘fiscal cliff’ to happen. That said, in practice, this may be a political gamble too far with a precarious majority. There will surely be an impact on certain sectors from the election outcome, however – most notably, healthcare businesses should benefit strongly from the implementation of ‘Obama-care’ yet may suffer in the event of a Republican victory.

Ultimately, the real difference may be between a decisive victory and a thin margin of success in both the presidential and senate elections. A stronger victory allows the winner to effect change. A marginal victory for either side in the senate could see gridlock and any resolution to the fiscal cliff pushed further down the road.

Perhaps the central concern for investors is the US has been seen as a ‘safe haven’ market of late. Valuations on the S&P 500 are high compared to other markets – and also compared to its history. Not only is there risk of disruption from the election – whichever way it goes – there is the risk that, if sentiment changes, built-in expectations are too high for the US market. As one multi-manager points out, if there is any lurch down in sentiment, people have already sold their European and Japanese holdings could the US be next?

October 2102