"Historically, a Republican clean sweep has been the most bullish scenario for S&P500 average returns, generating average of 16% returns during the administration says Christy Tan, Investment Strategist, Franklin Templeton Institute.

For equities, she said the biggest winners will be sectors and industries welcoming a more business-friendly regulatory environment, including fossil fuel energy companies, financial services and smaller capitalisation companies. Fears of caps on prescription drug prices will recede, boosting the fortunes of the pharma sector.

Given the results, the extension of the 2017 Trump tax cuts is somewhat assured. It is probable that the statutory and effective corporate tax rates will be lowered (the former to perhaps 15%) and that sweeping changes to business regulation will follow. What is less certain is whether tariffs will be increased on the scale and scope matching Trump's campaign rhetoric. That outcome will likely be determined on a case-by-case via bargaining among trading partners and with considerable input from the US business community.

Looking at fixed income, Christy says there are realistic expectations and concerns over the increase in long-term debt supply to finance short-term fiscal spending which will likely lead to higher yields in the long end of the curve.

However, for investors looking at the next 6-12 months, Franklin said it can be certain that the Fed will maintain its easing cycle and the house expects the overall environment to be conducive for fixed income investments for portfolio diversification. According to Franklin's investment teams they are expecting 10Y yield to fall to 3.75% and Fed funds rate to fall to 3.6% by the end of 2025.

Analysis of subsequent returns following past Fed rate cuts associated with soft landings shows that short-to-intermediate Treasury bonds have, on average, performed better than long-duration Treasuries. Moreover, they have exhibited smaller dispersion in returns, consistently generating positive performance one year after the Fed cuts. In general, the shorter end of the curve is more sensitive to Fed policy moves.

The US dollar is advancing on foreign exchange markets, boosted by the combination of higher US bond yields and the anticipation of strong inflows into US public and private equity markets.

With most signs pointing to a significant Republican victory, ongoing stock, bond, and currency market moves will be reinforced. At some point, however, rising bond yields may cap equity market gains.