The whole of the US waited with baited breath to hear the results of the election, perhaps none more so than financial sector workers. The election results have a dramatic effect on the markets, both immediately and long term. Promises made by government affect possible future performance of different market sectors. The news of Obama’s re-election potentially means many different things to different sectors of the market. The financial industry will be affected not only by changes to its own regulations but also by stock and share price fluctuations due to the addition or withdrawal of government support.
The finance industry
Barack Obama has said that he wishes to more strictly implement financial reforms in the Dodd-Frank Act than before, which will impact on insurers and investment banks which may have been getting away with more than they should. The profits of private equity firms may find their profits plummet as currently favourable tax policies for dividends and capital gains are likely to change. Traders dumped stocks in banks as they realised that Obama’s promised regulatory changes would prove costly to implement. The Dow-Jones industrial average plummeted by 369 points within the first two hours of trading on Wednesday, around 2.8%.
Healthcare
The phased implementation of Obama’s Affordable Care Act will benefit millions of US citizens. It has also already had an effect on the financial markets. Following the election results, on Wednesday hospital share prices rose across the board. Healthcare stocks overall traded around 1.4% down but the majority of the loss was in insurers’ share prices. Community Health Systems share prices rose by 6%, Bloomberg Industries hospital stock by 6.1% and HCA and Tenet Healthcare prices went up a huge 9.5% over the course of just that one day.
Energy/chemical companies
While renewable energy companies will be well backed by the Democratic government, other power suppliers saw stock prices plummet as traders dumped stock following the election. Obama’s promise to bring in more strict regulations to the energy industry as well as finance saw stock prices fall as everyone scrambled to rid themselves of burdensome stock in a hurry. The Obama cabinet are unlikely to invest in coal and it looks likely that the US coal industry will become more or less obsolete in a very short space of time. Obama is extremely keen to replace fossil fuels with renewable energy sources as widely as possible.
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