Fiscal Cliff Monitor (FCM)
Stocks down 1-2 percent with the Russell down 50 bps more than the S&P5oo; defense down 2.38%; VIX up 6 1/2%; dollar and bond flat, which is interesting on the back of a big equity sell-off.
We added the financial ETF to our Fiscal Cliff Monitor indicators.
President Obama met with business leaders today, including execs from General Electric, American Express, and Wal-Mart. The President plans to meet with Congressional leaders on Friday.
Very little focus on the expenditure side these days and looks like the first fight will be over the tax rate on high income earners. Here’s the Prez at today’s news conference,
But when it comes to the top 2 percent, what I’m not going to do is to extend further a tax cut for folks who don’t need it, which would cost close to a trillion dollars. And it’s very difficult to see how you make up that trillion dollars, if we’re serious about deficit reduction, just by closing loopholes in deductions. You know, the math tends not to work.
And I think it’s important to establish a basic principle that was debated extensively during the course of this campaign.
I mean, this shouldn’t be a surprise to anybody. This was — if there was one thing that everybody understood was a big difference between myself and Mr. Romney, it was, when it comes to how we reduce our deficit, I argued for a balanced, responsible approach, and part of that included making sure that the wealthiest Americans pay a little bit more.
I think every voter out there understood that that was an important debate, and the majority of voters agreed with me, not — by the way, more voters agreed with me on this issue than voted for me.
So we’ve got a clear majority of the American people who recognize if we’re going to be serious about deficit reduction, we’ve got to do it in a balanced way.
Some think the President was too confrontational at his press conference today and hell-bent on extracting a pound of flesh from high income earners. This may be one reason the market took a dive today.
Last week’s election, which we perceive as a swing to the left, was not, in our opinion, positive for stocks, capital formation, and the economy. Hope we are wrong.
What would a real fiscal cliff panic look like?
Stocks down hard; Russell 2000 down harder; consumer discretionary down hard; gold up; dollar down; VIX spiking; and defense stocks in the tank.
Bonds? Tough to extract a clear signal with the Fed’s financial repression, but, initially, the cowboys would most likely be in buying on recession fears and increased worries about going over the cliff.
(click here if table is not observable)