As North American markets pulled back from the previous session’s strong gains, BMO Financial Group’s market and investment strategists in Canada and the U.S. Wednesday offered their views on what a Barack Obama presidency means for financial markets and the economy.

“Obama’s victory will lead to a feel-good attitude within America at a time when gloom and sourness have become excessive. That favours financial assets generally at a time that fall is moving into winter,” said Donald Coxe, Global Portfolio Strategist, BMO Financial Group.

Coxe said Obama’s spending plans will be seen as economy-favourable with the United States in recession, and that stocks should benefit near-term.

He added that neither Obama nor Republican candidate John McCain promised significant revisions to the extremely favourable royalty structure for mining on federally-owned properties, mostly in the West. “That is important for Canadian gold miners operating in Nevada,” Coxe said.

Andrew Busch, BMO Capital Markets, Global FX Market Strategist, said he still expects a U.S. stimulus package of $150 billion to be enacted and checks out the door by March with an impact on consumer spending by late April and May.

”There is going to be massive government bond issuance in 2009 across the globe to pay for bailouts, stimulus packages, and social spending. This means we should see a further steepening of the yield curve in 2009, but it won’t necessarily point to a big economic recovery like it has in the past,” Busch said.

Jack Ablin, chief investment officer, Harris Private Bank, noted that both an Obama victory and a Democrat-controlled Congress are currently factored into markets.

Ablin said U.S. tax rates are expected to increase, which will give an edge to municipal bonds.

He added that “a move towards socialized medicine appears to be already discounted.” In examining the valuation of U.S. vs. European pharmaceutical stocks, the U.S. valuation already incorporates nationalized health care.

“We are a long way away from a sustainable equity market rally. A sustainable equity market rally will only occur when it is clear that the spectre of a protracted, significant U.S. economic recession is not in sight,” warned Paul Taylor, chief investment officer, BMO Harris Private Banking.

Leading economic indicators signal a meaningful U.S. and global economic recession, Taylor said. This will cause policymakers in Washington to focus attention on the economy as the number one priority.

He suggested that investors should have a defensive strategy, with an overweight in consumer staples, telecom, utilities. Investors should underweight in energy, materials and technology “until the spectre of recession is past.”

IE