The initially limited market reaction to the re-election of President Obama made sense because this was the outcome that had looked most likely. In any event, economic prospects might not have been much different if Mitt Romney had won, especially as Congress remains divided. But the subsequent weakness in equities makes sense too: as we had anticipated, the focus has quickly moved on to the uncertainty over the “fiscal cliff”, and perhaps back to the unsolved crisis in the euro-zone as well.
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