Dennis Gartman, the U.S. commodity trading guru, figures people outside the United States have it all wrong when it comes to Tuesday’s election.
He recently came across an article in the Guardian newspaper that cited a survey of 21 countries around the world. The poll found that people in 20 of those countries favoured the re-election of Barack Obama.
Mr. Gartman, by contrast, is an unabashed believer that not only should Republican hopeful Mitt Romney win – he will.
“I’m just amused at the vision with which the rest of the world looks upon Mr. Romney. You guys just have him completely wrong, you, England, Germany,” Mr. Gartman says, referring to Canadians in the second person.
Mr. Gartman says foreigners think of Mr. Romney “as being some sort of war mongering capitalist ogre,” while in the U.S. he’s in the centre of the political landscape and as an individual is “the decentest man you’d ever want to meet.”
If the polls are to be believed, the election remains a dead heat, with voters in a few crucial states likely to determine the outcome. Mr. Obama has the benefit of being the incumbent and Friday’s better-than-expected payroll figures may put a bit of wind to his back, so it would not surprise anyone if he emerges as the victor.
But what if Mr. Romney wins? Investors who view the contest as a toss-up may not be pricing that scenario into stock prices.
Mr. Gartman figures stocks will bounce higher if Romney triumphs, as he predicts. Investors should position themselves for “a rally in the stock market on a Romney victory, especially if it’s decisive.”
However, Republicans have had bad luck with stock markets (think of the meltdown during George W. Bush’s final term), so Mr. Gartman wouldn’t advise that investors overstay the upswing. “History is not kind to Republicans,” Mr. Gartman says of the longer-term trend.
Whoever wins, an immediate challenge looms: the so-called fiscal cliff, which is shorthand for a series of multibillion-dollar tax increases and spending cuts that will begin in January if politicians aren’t able to produce an agreement on fiscal measures.
Mr. Gartman anticipates that negotiations about the cliff won’t be a big deal for markets and will follow a common script, regardless of the victor. “We have a history of going right to the 11th hour, 59th minute, and then they find some way to either kick the can farther down the road or make some sort of agreement. I suspect the same thing shall happen this time.”
Because the polls are so tight, there is another outcome that some observers view as a worst case scenario: a hung election because of recounts at the state level or a tie in the number of Electoral College votes for each candidate.
“Whoever wins, I want it to be decisive,” says Andrew Busch, global currency strategist in Chicago for BMO Capital Markets. “The last thing we need to do is go through uncertainty either through a recount or through an Electoral College tie.”
Such outcomes aren’t entirely far fetched: the 2000 election wasn’t settled until the Supreme Court handed the vote in Florida to Mr. Bush.
If the result is unclear, stocks will head south, Mr. Busch says, pointing to the large sell off after the 2000 vote.
The probabilities of such an outcome are not insignificant. Mr. Busch estimates there’s a 20-per-cent chance of a recount and a 10-per-cent possibility of an Electoral College tie. Should the result be unclear, it will be look-out-below time for stocks.