The elections are over. President Obama gets another four years in the White House. This means Ben Bernanke remains at the Fed. Tim Geithner will remain at Treasury if Obama insists, but Geithner has made clear his preference to step down. Analysts are speculating about who might replace him. Chances are, however, that Geithner will remain at least until some compromise is reached on the fiscal cliff, the most important immediate issue facing the government.
As for stocks, the Obama victory means that the Fed's easy money policy will continue indefinitely. The effect is already wearing thin, but this policy could fuel the rally in stocks and commodities a little longer. Over the long term, however, it runs the risk of fueling inflation. The Obama victory is bad news for medical device manufacturers who are facing a 2.3% excise tax on the price of their products. This is a tax that will come right off the top line. It's also bad news for for-profit education companies and financial companies, both of which will face more regulatory hurdles. Obama's victory is good news for alternative fuel companies, especially those working in the solar and wind industries. It's bad, however, for traditional carbon-based energy companies. It means less drilling for oil and gas than we would have seen under a Mitt Romney presidency. Obama's victory also means that Obama Care will not be tweaked. As a result, healthcare insurance companies should see more customers even though profit margins could decline.
The stock market rallied strongly on Tuesday. Perhaps investors, who tend to favor Republican policies on the economy, thought Mitt Romney might actually pull off a victory. Or perhaps they were just happy that the uncertainty was about to end. Whatever the case, investors seem to be suffering from a morning-after hangover. As of early Wednesday morning, stock futures are decidedly in the red.