Investors fasten your seat belts: The D-Day has arrived!

Investors across the world are on their tenterhooks as US awaits the announcement of its 44th President. There has been a lot of discussion/ speculation around the world as to who is going to be the next incumbent to the White House. But from an economists' point of view it is hardly significant on who occupies the coveted position, as it is certain that the next incumbent would have to sign the obituary of the current 'Super Power' of the world. 

Believe me, the US economy is in shambles and the outgoing President Barak Obama must take due credit for this sorry state of affairs along with the Federal Reserve of the US Govt. In response to the faulty economic policies followed by the Obama administration, FED has been printing money to be distributed amongst the borrowers at the cost of the savers. This policy can be termed as 'rich getting richer'. US GDP growth during the eight years of the Obama administration averaged half the rate of the Clinton years and only one-third the rate of the Kennedy and Johnson years. The FED has followed a Zero interest rate policy for the past 8 years and is still shy of reversing it, but this artificially managed rate is no longer sustainable. When the US moved away from the Gold backed US Dollar standard in the early 70's, its credit to GDP ratio was 1.5:1, today it has shot up to 3.2:1. The new US President would have to address this anomaly, and the chances of declaration of a 'Financial Martial Law' in US are extremely high.

Thus, whom so ever wins the November 8 election, the markets around the world are likely to slip into a 'Coma' for a while before they are able to appreciate the reality. The next 2 months are going to be extremely volatile for the markets, as the transition of power in the US is not going to be a smooth affair. Things are likely to settle down only after the new President assumes office in the middle of January 2017. It is not going to be easy for the new President, as he would also have to prepare for transfer of the 'Super Power' baton to another nation. Who the next Super Power would be, will be decided in the next couple of years, but China seems to be a front runner for the crown, provided it is able to address its growth issues, which have taken a temporary beating.

Post the results of the US election, US markets would almost certainly lead to a fall in the markets worldwide, they could correct anywhere between 10-20% during the course of next 2 months. Investors in India are advised to tread cautiously during this period, as there is a likely hood of heavy FII outflows during this period. But at the same time it would provide a good opportunity to enter the market on declines, as India is on the cusp of a sustained bull run due to 2 major favourable factors: Low crude oil & commodity prices and a low interest rate regime. Indian markets could turn attractive after a 5-6% fall from hereon, that is around the levels of 8000 on the Nifty, when the risk-reward ratio would turn attractive. Mid Cap and Small Cap indices could go down more during this period, after their recent dream run.