certainly uncertain

There’s a deal but so what? Post-fiscal cliff uncertainty could do some real damage to markets

January 2, 2013
Obsession
Fiscal Cliff
January 2, 2013

For now, it looks like a deal passed and the fiscal cliff was averted.

So what does that mean for global markets? The bull case is that it removes uncertainty and lets them rip higher.

But the timing here is tricky. Markets closed early on the last day of year, then were shut down our first day of 2013. This adds an extra level of uncertainty.

Besides, let’s look at what has really happened:

Sequestration (billions of dollars in across-the-board spending cuts) was pushed off a couple months for the new Congress.  Thus, it doesn’t seem like we have eliminated uncertainty, just pushed it off to later.

The debt ceiling is next and will likely be an even bigger issue with what seems to be an almost dysfunctional government.  I don’t see this helping reduce uncertainty.

I will ignore that “reduced uncertainty” has been a constant theme that at least so far has never amounted to real economic growth.

Most people will get smaller paychecks next year.  Reduced uncertainty would go better with higher take-home pay.  Why is everyone cheering what is a tax hike? Spin is one thing, the reality is another.

Then we get economic data. Last year, we had some monster data and some great weather in the first quarter. It’s hard to say how much of that were seasonal adjustments, but we may see some negative impact if last year’s Q1 numbers were overstated.

Having gotten bullish finally last week, I don’t see it here. Expect a small pop (maybe) and then drift lower.

Credit can do better than equity.  Foreign markets better than domestic.

We will see what happens, but I find the hype and spin just doesn’t match the reality of what has actually just occurred.

We welcome your comments at ideas@qz.com. 

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