Wall St prepares for four more years

Obamacare has survived its most important test – a US presidential election. There can be no doubt that Americans voting for Obama knew it would mean health care reform would be staying put. The sector will now be able to move – for better or worse – with a sense of certainty about the permanency of Obamacare.

Insurers will need to prepare for the influx of new customers and their accompanying risk profiles. Pharmaceutical companies will need to adjust to provisions requiring them to provide discounts on branded drugs to Medicare recipients. Medical device manufacturers will need to prepare for a new sales tax and hospitals can look forward to reduced bad debt, as former bad payers will now be covered by insurance.

Much of these reforms still require supporting regulation but the trajectory of health care law is clear.

Strength through careful spending

Any budget deal will have to address the sizeable defense expenditures. The industry is immediately confronted with $500bn of cuts due to be implemented in 2013 but the President is already on the record as being willing to find a way to delay those cuts.

The extent of industry cuts as a result of the forthcoming budget negotiations are unclear but the sector will need to prepare for some form of reduction and adapt to Obama's clear intention of making the US military leaner and meaner.

It hurts to back a loser. But that's exactly what a large section of Wall St did in the lead up to the 2012 presidential election. They'll now have to take a large dose of reality and quickly figure out which battles are worth fighting.

No President wants to be at war with corporate America but this one has shown a willingness to fight Wall St. Having won a now famous victory he may be less inclined to compromise than many assume. Market players will now have to think very carefully about their approach to upcoming regulatory challenges. Such an approach necessitates accepting the electoral verdict.