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The presidential race is going to be a close one with most polls showing the popular vote a statistical dead heat, but with Obama leading in the all-important projection of likely Electoral College votes. The election will ultimately be decided by a handful of key battleground states and by undecided voters. With the swing states giving president Obama a slight advantage, pundits are bracing for the possibility that Mr. Obama will win the Electoral College, but lose the popular vote. And if Mr. Obama is re-elected, he will need a clear mandate to have any realistic hope of reaching a deal with Republicans in Congress on looming tax hikes and spending cuts to avoid tipping over the “fiscal cliff.”

There is even a remote chance that with the race so close, that President Obama and Mitt Romney may end up tied with 269 votes each and one shy of the 270 votes necessary to capture the White House. In the event of a tie, the House of Representatives, which is likely to remain under Republican control, will chose the president and the Senate would choose his vice-president. With the Senate expected to remain under control of the Democrats, the possibility exists that we could wake up Wednesday morning to President Mitt Romney and a Vice-president Joe Biden.

To many, the Electoral College system is badly outdated. To some, it helps preserve the rights of smaller states. The system dates back to a time when the United States consisted of just thirteen states and a population of less than four million people. In order to work the system, both presidential candidates have focused on nine key battleground states accounting for 110 Electoral College votes. None is more important than Ohio and its 18 votes for capturing the presidency.

The decline of the American middle class is a central campaign issue and one that both candidates are trying to address. President Obama has suggested extending middle class tax cuts given to them by George W. Bush and Mitt Romney has pointed out the declining fortunes of the middle class and promises to not only extend the Bush tax cuts but to reduce taxes by a further twenty percent. And in Ohio, a manufacturing-based state, the growth in income inequality has spawned fears that the long era of economic growth that has turned the United States into the wealthiest nation on earth may have ground to a halt.

And the data seem to support the notion that the American middle class is under threat. According to U.S. census data, the percentage of U.S. households with median incomes between $50,000 and $149,999 fell to 41 percent last year from 44.5 percent in 2000. While households earning less that $15,000 jumped to 13.5 percent from 11.1 percent in 2000. Even the median U.S. household income has tumbled to $50,054 today from $54,932 a decade earlier.

Regardless of who wins the top political job, dealing with the debt ceiling and the fiscal cliff will clearly dominate the post-election agenda. Recent surveys of institutional investors show that an Obama win would be good for bonds while a Romney win would be good for stocks. While democratic presidencies have been good for stocks, such as the Clinton era 225% run-up in the Dow, the proposed changes to long-term capital gains and dividends under Obama would put a damper on the stock market. Certain market sectors such as healthcare, alternative energy and real estate should do better under an Obama presidency, while conventional energy, defense and telecoms would be the go-to sectors if Mitt Romney were to capture the White House.

Despite Tuesday’s outcome, key leading indicators such as consumer confidence, housing starts and declining corporate spreads suggest that the fortunes of equities are about to turn up after October's S&P500 decline of two percent. Global purchasing managers' indices (PMIs) are still showing contraction in the industrial economy; however, the rate of decline is slowing—suggesting that things may be looking up in the near term for global manufacturing. For my money, I favor the beaten-up cyclical names in the energy and materials sectors that should experience a post-election bounce.

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