Although markets have already priced in his victory, the election of Barack Obama should provide some support for commodity prices and the JSE in the short run, analysts say.
Americans elected Obama as their president on Tuesday, handing him an historic victory over Republican John McCain.
There is a perception that Obama should lift the US economy out of a recession earlier, says Chris Harmse, chief economist at Dynamic Wealth.
Dealing with the financial crisis has been a clear priority in Obama’s campaign. His commitment to stricter regulation, fiscal discipline and dealing with the budget and current account deficits has also been popular with investors. There is also a perception that his economic advisors will be better equipped to deal with the crisis.
While he still faces a huge challenge, the markets are more comfortable with his clearly articulated economic policy, says Harmse.
He expects a small boost to commodity prices, which could help to boost the JSE, on Wednesday amid hope that the US economy might be saved from a deep recession.
Democrat better for investors
While Republican presidents are traditionally favoured by the market because of their business-friendly, lower-tax policies, history shows that Democrat presidents are better for investors.
Since 1901, the share prices of the 500 biggest US companies have risen more than 7% a year on average under Democratic presidents compared to 3% under Republican presidents, according to Ned Davis Research.
A Democratic sweep of the White House, Senate and House of Representatives has already been priced into stocks.
Emerging markets have already started to pick up, staging their sharpest rise on record last week in the run-up to the election.
“Obama’s election will be positive for our markets in the short run,” says Dawie Roodt, economist at the Efficient Group. “All the hype surrounding an election is usually good for the markets.”
But he warns that although Obama is seen as “a knight in shining armour” at the moment, the US economy is in huge trouble and “things could look different in the long run”.
Obama could have a positive impact on the broader SA economy, though – particularly through trading.
Risk of protectionism
The US is now southern Africa’s biggest trade partner and from this perspective the elections have important implications, says professor Gerhard Erasmus of the Trade Law Centre of Southern Africa (tralac).
He warns that – given the current financial crisis and global economic slowdown – there is a real risk that protectionism may be on the rise.
Obama has made threatening noises about renegotiate huge trade agreements to make them more beneficial to the US as well as protecting US jobs against foreign competitors.
However, he is also on record about supporting the Africa Growth and Opportunity Act (Agoa), which allows 38 African countries to export certain products (like textiles) tariff-free to the US.
Erasmus says there is still ample scope to improve access to the US market, especially for agricultural products. In addition programmes to support the development of supply-side capacity of African countries related to infrastructure development, water and transport, can also enhance Africa’s capacity to trade.
Obama has also stated that he wants to expand free trade agreements with African countries.
“A new US administration should consider reopening negotiations with (the Southern African Customs Union) SACU to conclude a free trade agreement. Certain lessons can be learnt from the failure of these negotiations two years ago and Washington should be more accommodating of specific needs in areas such as services,” Erasmus says.
Delivering a gravely sick economy from a deep recession (and building up a struggling continent through trade) seems like an impossible feat. But Obama has beaten the odds before.