Chances are high that history will remember 2012 as a pivotal presidential election year. The winner has yet-to-be determined, and as I type, the polls are showing a dead-heat. With so much at stake, the results will no doubt be Market-moving.
Friday’s job report provided more evidence that the US Economy continues to push forward with growth, albeit at a slow rate. But it is moving forward, while other countries remain mired in recession.
Our trusted and independent Washingtonsources hosted an election preview today. They still believe, regardless of who wins the Presidency, there is a high probability of a bi-partisan deal that gets done in the lame-duck session preventing us from going over that “Fiscal Cliff”. Doing nothing would trigger higher tax rates and mandated government spending cuts, to the tune of $1.2 Trillion. The Congressional Budget Office (CBO) has already predicted going over the “cliff” would force us into another recession. No surprise, these stakes are extremely high.
The Market sure doesn’t seem to be pricing-in a fall off that cliff in our estimation, and we do believe that as long as there is an actual winner come Wednesday (remember the 2000 election?), there will be an eventual bipartisan deal made in December. We are also confident that it won’t be pretty and there will be a great deal of jaw-boning and political rhetoric that could create some tension in the Markets.
HurricaneSandybrought devastation to the East Coast, and still has many Americans without power. The New York Stock Exchange remained closed for 2 days, the longest weather related shutdown since a blizzard in 1888. There have been some debates as to whether the election should be delayed until some normalcy is restored. New YorkandNew Jerseyare both considered “Blue” states and appear to be firmly in the hands of the Democrats in terms of the Electoral College. But this election is so tight, that the Popular vote could swing either way, which could result in a split, adding to the complexity of the situation. This is a really big deal.
We are following these developments very closely. A clean, and decisive election result should provide a sigh of relief for the Market, regardless of who wins. But the next step will be Congress attacking that Fiscal Cliff, and that no doubt will provide great interest and anxiety as we close out this eventful 2012.
By: Mike Frazier