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Shocks and Cliffs

November 13, 2012 – 6:15 pm

Markets tend to worry about something and even in bull markets there is a saying, ‘the stock market crawls up a wall of worry’. Today that worry is the so called ‘fiscal cliff’. I noted this morning that marketwatch.com a web site put out by ‘The Wall Street Journal’, has a countdown clock on their front page in days, hours, minutes and seconds to when the we go over the cliff.

This worry is one that is justified as over $600 billion in cuts and increase in taxes will go into effect. This, the experts say, will push us into another recession.

However, what are the odds that it really will come to that? The Republicans are already sounding out some concessions and the President said he is willing to accept some compromise. The odds favor either a temporary solution with a combination of agreement on some issues and a ‘kick the can down the road’ on others. Neither side wants to be blamed for another recession.

At some point Washington is going to have to deal with the real issue and that is spending. Cuts in spending will be the only way to balance the budget. Let’s just hope our economy is stronger when that happens because at 2% GDP growth there is little the economy can absorb in the way of shocks. Of course that is exactly what the ‘fiscal cliff’ is, a shock to the system.

Good Trading
Steve Peasley

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