Perceptions that these crises have been caused by irresponsibility within America’s financial institutions means that regulation has become a hot political topic.  Although political pressures would likely cause either party to make significant changes to US financial regulations, a Democrat victory would have a far greater effect on the industry, according to Threadneedle.

“This is an important election, as it takes place at a time when the credit crisis and takeover of major banking institutions by the US Treasury sees the largest expansion of government power over the financial system since the Great Depression. That is a given regardless of who wins,” said Cormac Weldon, head of US Equities at Threadneedle.

“Should, as seems likely, the Democrats extend their power in the legislature and the White House, we can expect to see legislation to increase oversight and regulation of the financial industry, especially in the area of derivatives and structured financial products, such as the securities with mortgage debt wrapped into them, which were at the heart of the original meltdown in the summer of 2007,” Mr Weldon said.

He continued: “Rules that now apply to commercial banks will probably target hedge funds and equity firms. Given the debacle of the meltdown in the sub-prime mortgage sector this would also be the case were the Republicans to win control, but the oversight and regulation would likely be more flexible and have a lighter touch.”

The implications of the US presidential election are, of course, highly complex and as Mr Weldon pointed out “across sectors it is much too simplistic to deduce that a Republican victory would always be preferable to a win for Democrats.” 

According to Threadneedle, a Republican win would prove more beneficial for the utilities sector as the party is less in favour of climate change regulation and more pro-energy in general than the Democrats.  The republicans “are likely to seek legislation more favourable to the coal and petroleum industries on the issues of carbon trading, or carbon taxes,” said Mr Weldon.

The healthcare and medicine industry will be affected in a variety of ways by the outcome of the presidential election.  Mr Weldon, said: ‘A Republican victory would prove more beneficial in the areas of pharmaceuticals, medical devices and managed care, where in the case of pharmaceuticals, Republicans are more amenable to protecting patents, while opposing the re-importation of drugs.”

Conversely, a Democrat win will favour small biotech companies as the party favours a speeding up of the process through which drugs are granted government approval, as well as preferring the use of generic, rather than brand name drugs.  The Democrats’ plans for universal coverage would also greatly expand the potential number of patients being treated.

There are similar intra-industry differences when it comes to industrials and materials.  “Within sub-sectors, aggregates would benefit from Democratic control, as the party seeks to stimulate the economy with infrastructure projects. Airlines would benefit from a Republican victory, as the GOP favours less regulation and is more amenable to consolidation. Aerospace/defence is also more likely to prosper under Republicans,” said Mr Weldon.

“The consumer industry is another area with many sub-sectors. The beverages, food and restaurant industries would likely be harmed by new curbs on immigration and strong immigration control measures favoured by Republicans, while the tobacco industry would do less well under the Democrats, who favours greater taxation and regulation of the industry,” he added.

Mr Weldon concluded: “These are a few of the major industries whose fortunes stand to be impacted by the differing policies and philosophies of the two major American political parties. The outcome of the election will serve to illustrate that the effect of a change of power in government can have widespread influences in the market.”