Thankfully the election is over. I don’t know if I could have taken another day of the constant barrage of negativity and attacks being waged everywhere from TV, radio to print. In the end, after the most expensive election in history we basically have a government that has changed very little. President Obama has another 4 years, the House of Representatives remains controlled by Republicans, and the Senate is still controlled by Democrats. Bottom line government is unchanged and it cost 6 billion dollars. (Yes that is “B” for “billion”)
As
discussed in last week’s newsletter, there was very little domestic news to
trade on this week as everyone has waiting on the election results. The election is done and the markets went
crazy on Wednesday with investors pulling their money out of the stock market
causing the DOW to experience its largest one day decline of the year of 313
points. On Thursday the markets
continued to tumble with another drop of 121 points.
Individuals
not in tune with the markets believed that the drop was due to the fact that
President Obama had been re-elected for another 4 years. As much as investors and Wall Street were not
thrilled with the election results, the sell-off in the markets was due to the
fact that the landscape of government has not changed. The fear that is taking over the markets is
that if both sides of government don’t start working together quickly, the economy
will very likely by thrust back into a recession at the start of 2013.
You
may or may not know what it is, but the headlines all over the business wires
are about this thing called the “Fiscal Cliff”.
In 2011 the Budget Control Act of 2011 was passed. This law was created to permit the government
to extend the debt ceiling which allowed the government to continue to borrow
money to keep operating. The law was
passed and, simply put, stated that if the government is allowed to continue to
borrow money, then Congress must agree to adopting certain spending controls
and policies by the end of 2012. In the
event that Congress does not put these controls in place, then spending cuts
and tax increases will be triggered on January 2nd 2013.
Well...
here we are almost at the end of 2012 and Congress is no closer to coming to an
agreement on taxes and spending which means we are getting dangerously close to
the Fiscal Cliff becoming reality.
Investors are scared and are starting to pull their money out of the
stock market now. If Congress does not
get their act together then the spending cuts will be triggered and you can bet
your last dollar that we will see the stock market tank like it did back in
2007.
Personally
I believe that Congress WILL come to an agreement, however it may not happen
until after the cuts begin to take place and pressure is put on them to take
immediate action.
JJ Mack
916-517-1800
jj.mack@apmortgage.com
www.apmcroseville.com
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