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Obama victory no cause for celebration as investors retreat

Noel Hulsman

Four years ago, the U.S. election sparked celebrations across Canada. The country collectively exhaled, marking the end of Bush's reign of error, and the beginning of hope and change, Obama-style.  Students, beer in hand, poured out into campus streets to share in the moment.

Four years later, the results invited a slightly different reaction: North American markets hit the skids. Joining the S&P 500, which experienced the biggest sell-off so far this year, the TSX nose-dived, dropping to a near two-week low before the mid-day of trading.

Indeed every sector took a beating, none more so than energy, with coal stocks suffering double-digit losses.  (The pundits and public may not have heard enough from Obama on climate change during the election, but clearly investors did.)

Nor is there much ambiguity on which of the parties has traditionally been fervent supporters of free trade and deregulation, particularly when it comes to drilling; a fact lost on no-one interested in Alberta's abundant oil sands.

If part of this morning's market downturn stems from the rejection of a Romney regime, much of it is also a response to four more years of fractured rule. As predicted, the Democrats strengthened their hold on the Senate last night, while the Republicans solidified their grip on the House of Representatives, meaning Congress remains deeply divided. It's a log-jam that thwarted countless legislative initiatives during Obama's first term, and promises to stall if not entirely derail, many bold initiatives going forward.

Of particular concern now, and what's fast emerging as the latest Internet meme, is the impending 'fiscal cliff'. As the CBC's Chris Hall neatly summarizes in a post earlier today, the cliff threatens to come into effect on New Year's Day , and if it does, will add some two million Americans to the ranks of the unemployed, and slash hundreds of billions of dollars from the U.S. economy. If it hits, our economy will feel it very, very hard.

Jan. 1 is the day when mandatory spending cuts and tax hikes will simultaneously hit, unless a comprehensive deal is worked out between the White House and the Congress. The two sides have shown exceedingly little interest in compromise to date. Even the smallest matters, many analysts fear, will evoke a deep descent; one that will surely pull the Canadian economy down in the process.

Had Romney won instead of Obama, the thinking goes, the prospect of a legislative deal would have been immeasurably stronger.

Of course, a true take on the election's impacts can't be gathered in the early hours, before the confetti has even finished falling. A Romney victory may have smoothed the way for easier congressional talks between now and New Year's Day, but would have sent a message to the world that the party of Bush was back in power, a prospect that few could welcome. Even the U.S. didn't want that.