The U.S. election is over and President Obama has been elected for another four years.
The U.S. Senate is set to remain Democrat with a majority (53-45 with two independents included in the majority, and 2 races not decided.).
The U.S. House of Representatives is set to remain Republican with the early tally at 231-190 with 14 seats still up for grabs. President Obama defeated Gov. Mitt Romney 303-206 with Florida's 29 votes still not called yet. CNN has the popular vote as Obama 50% with 59.6 million and Romney at 48% with 57 million.
These facts indicate that the country wants to keep a balance of power in Washington and has not provided a clear mandate for anyone.
For the markets, this is not the disastrous result that some will paint, but the result will carry positive and negative consequences for the economy and for investors.
(Read More: For Investors, More Fed Easing, Cliff 'Heart Attack')
Here are my top ten impacts.
1. U.S. business will now see a clearer direction for policy towards debt and deficits.
2. Insurance companies, hospitals, generic pharma are Obamacare winners.
3. Biofuels and autos are winners.
4. A cut in the corporate tax rate from 35% to 28% is likely.
5. Municipal bonds will retain strong demand.
1. Dividend tax rates rise to 43.4% from 15% and capital gains tax rates rise to 23.8% from 15%.
2. The US will retain an extra-territorial tax system with a new minimum tax.
3. Estate tax rates rise to 55% from 35% and carried interest tax rates rise from 15% to 43.4%.
4. Obamacare and Dodd-Frank implemented.
5. Fiscal cliff negotiations will risk a partial solution or none during lame duck with ratings agencies warning/downgrading in Q1 2013.
1. There should be tremendous portfolio churn from dividend paying stocks to growth stocks. Ironically, we may see a surge in dividend payouts at the end of 2012 before the tax increase occurs, but watch out for the ex-dividend date sell-off.
2. Capital formation will be less efficient and capital investment will be below optimal levels.
3. $1.7 trillion in overseas profits held by U.S. corporations will be taxed at a minimum level hurting big tech and big pharma.
4. Tax avoidance will return as an investment strategy with less productive uses of capital.
5. Fiscal policy will center on higher taxes for upper income earners, less spending cuts and lower growth rates for the economy overall.
As most readers know (and those that have heard me speak), I'm a one issue investor/strategist and that issue is economic growth. Corporate tax reform is the key area for generating economic growth as U.S. has the highest nominal tax rate in the OECD and the 35% tax on profits earned overseas represent areas for improvement. The good news is that the nominal rate will be cut, but the 35% repatriation tax will not. I had hoped that a cut in the 35% rate would have generated a massive flow of capital back to the United States and this would also be followed by additional capital moving out of tax havens to more productive uses.
The best news is that the U.S. economy has several very good things going for it as it recovers: housing, energy, and manufacturing accompanied with a short-term positive of extremely easy monetary policy. The outcome of the election is a matter of degree of what positives could have been.
Andrew B. Busch Director, Global Currency and Public Policy Strategist at BMO Capital Markets, a recognized expert on the world financial markets and how these markets are impacted by political events, and a frequent CNBC contributor. You can comment on his piece and reach him here and you can follow him on Twitter at http://twitter.com/abusch .