As media excitement over the US election mounts, many financial commentators are strangely unmoved. In focusing narrowly on George Bush and John Kerry's campaign pledges, they may be missing just how different their policies could be. The risk is that, relative to a Kerry presidency, a re-elected Mr Bush would deliver greater geopolitical tension and fiscal laxity.
Some would argue that the financial markets should ignore the election - the president has little influence on the economy. Monetary policy lies in the hands of the Federal Reserve, while, the president's impact on fiscal policy is constrained by Congress. And the difference between the basic thrust of Mr Bush and Mr Kerry's fiscal policies is slight: both plan to cut the budget deficit in half.
But many commentators take campaign proposals too literally. These pledges typically mix populism with wishful thinking, and the deliberately vague with the downright misleading.
So it's hard to say, ahead of the election, how much the choice of president matters. But that in itself is the first reason why it does matter: that the outcome is uncertain is bound to have held down US stock prices and bond yields.
But the election will matter - it will do more than end the uncertainty. Beneath the electioneering, Mr Bush and Mr Kerry have made specific proposals that could be delivered, and commentators are starting to identify potential winners and losers.
A "Bush portfolio" would include conventional energy, defence, pharmaceuticals, brokerage, luxury goods manufacturing, money management and retailing.
Mr Kerry's would include alternative energy, generic drugs, biotech, healthcare, downscale retailing and the mortgage groups Fannie Mae and Freddie Mac. Meanwhile, the Democrat's sceptical rhetoric on free trade, his attacks on offshoring and his complaints about the Chinese yuan's undervaluation suggest that a Kerry victory would depress the US dollar. However, I suspect that he would be unlikely to act on his populist rhetoric.
Beyond the specifics, there could be larger differences. Given a Republican Congress, and one that contains far fewer fiscal conservatives than a decade ago, any significant reduction in the budget deficit will have to rely on strong economic growth. If there is a risk, it is that there may be further fiscal easing from Mr Bush. His first-term record on taxes and spending surely casts doubt on his renewed pledge of restraint.
However, it is on foreign policy that the election will have its greatest impact. While the problems of the terrorist threat and the exit strategy from Iraq will remain, a Kerry election victory would surely have a huge effect. To see this, one only has to ask the question: would Mr Kerry have invaded Iraq?
While the Iraqi quagmire has dampened the Bush administration's enthusiasm for the hawkish neo-con agenda, it is still committed to radical change in the Middle East. It is easy to see Mr Bush's re-election being followed by more geopolitical tensions. The implications could range from high oil prices and big budget deficits to anti-Americanism in the next cycle of elections in Europe. The damaging effects of this on global growth might be more dramatic than any prospective fiscal policy changes.
Foreigners may have exaggerated expectations of the degree to which Mr Kerry would shift back towards a more multilateralist approach, and of how successful such a shift might be in easing tensions. But they may also be underestimating the energy with which a re-elected Bush, with a Republican Congress behind him, would continue with his proactive confrontational strategy.
Mark Cliffe is chief economist at ING Financial Markets.Reuse content