Results also demonstrated that the Republicans held on to their majority in the House of Representatives while the Democrats retained control of the Senate. In the opinion of Rob Carnell from ING: “This may well prove to be a big headache for Obama, who has only about 55 days to get a budget passed, or face the devastating consequences of fiscal cliff.” The freshly re-elected president is already preparing to meet with Congress in the upcoming weeks to address the problem.
The Rabobank team of analysts expect the possibly tough negotiations to “unsettle financial markets in November and December and put downward pressure on US treasury yields.”
Fitch rating agency also put immediate pressure on Obama by announcing later on Wednesday that that there was no “fiscal honeymoon” for him in store and that without finding a solution to the fiscal cliff the US would face a downgrade in 2013. BBH economists comment: “Our proprietary ratings model has the US remaining as a borderline AAA credit. However, this assumes that the US does not fall off the fiscal cliff.”