The financial markets are officially not OK with this fiscal cliff thing

December 21, 2012
Obsession
Fiscal Cliff
December 21, 2012

So sure, we’ve been talking about the fiscal cliff for months. But the operational assumption of much of Wall Street has long been that no one in Washington, DC would be stupid enough to essentially drive the US back into the recessionary territory they’ve spent the last four years clawing out of. Think again!

Republican House Speaker John Boehner’s decision not to hold a vote on the so-called Plan B option, apparently because he could not even get members of his own party to vote for a plan that had any tax increases in it whatsoever, seemed to get the attention of financial players. Here’s a look at how equities futures took the news.

Tap image to zoom
Plan B vote sinks stocks
Yikes.(FactSet)

One can’t help but be reminded of other prominent examples of Wall Street and Washington not being on the same page in recent years. Of course, who can forget Sept. 29, 2008 when stocks plunged after Congress voted down the first version of the bank bailout bill known as TARP. And then there was last summer, when the chaotic effort to raise the debt-ceiling and avoid a US default sent investors into a tizzy.

The markets seem a bit less ready to bet against stupidity leading to bad outcomes in Washington this morning. On the other hand, some argue that the markets have an important voice in the current debate, and the prospect of an ugly selloff similar to the previous episodes we mentioned above may help prod elected officials toward a deal. Or so you would think.

Top News

Powered by WordPress.com VIP
Follow

Get every new post delivered to your Inbox.

Join 24,385 other followers