Is the “Fiscal Bluff” the same as Y2K? In 1999, Y2K was a massive concern to investors, but turned out to be over-rated and the markets continued to move higher.
The “Fiscal Bluff” could mean a worst-case scenario of $600B in lost spending, which some believe will crush the economy. Sort of like how the $800B stimulus a few years ago made the economy sky-rocket higher, right?
The “Fiscal Bluff” is why many investors are on the sidelines. Many investors made the same move during the debt ceiling debate in 2011. However, that move hurt investors’ pocketbooks as stocks and bonds were not pummeled like many thought they would be.
So just who does the “Fiscal Bluff” benefit? Two parties: first, given that the phrase exploded after the election, the media has benefitted greatly. Second, it does seem to provide cover for politicians to NOT deal with the issue.
The “Fiscal Bluff” is not really a cliff, which is why we’re referring to it as the “Fiscal Bluff.” If nothing happens, the impact of spending cuts will be phased in over time – they will not happen all at once. Some prefer the term “Fiscal Slope,” which works better than cliff.
2056-CLS-12/13/2012
Content provided by guest contributor, Rusty Vanneman, CLS Chief Investment Officer
Is the “Fiscal Bluff” the same as Y2K? In 1999, Y2K was a massive concern to investors, but turned out to be over-rated and the markets continued to move higher.
The “Fiscal Bluff” could mean a worst-case scenario of $600B in lost spending, which some believe will crush the economy. Sort of like how the $800B stimulus a few years ago made the economy sky-rocket higher, right?
The “Fiscal Bluff” is why many investors are on the sidelines. Many investors made the same move during the debt ceiling debate in 2011. However, that move hurt investors’ pocketbooks as stocks and bonds were not pummeled like many thought they would be.
So just who does the “Fiscal Bluff” benefit? Two parties: first, given that the phrase exploded after the election, the media has benefitted greatly. Second, it does seem to provide cover for politicians to NOT deal with the issue.
The “Fiscal Bluff” is not really a cliff, which is why we’re referring to it as the “Fiscal Bluff.” If nothing happens, the impact of spending cuts will be phased in over time – they will not happen all at once. Some prefer the term “Fiscal Slope,” which works better than cliff.
2056-CLS-12/13/2012
Content provided by guest contributor, Rusty Vanneman, CLS Chief Investment Officer