With the clock ticking the Cliff is still the most talked about news item. As usual our leaders are playing political “chicken” with America’s financial future. I think based upon past negotiations it will go down to the wire unless the behind closed doors things are working that we don’t know yet. Many investors are selling based on what if’s regarding higher taxes without any true facts. The markets are responding with narrow trading and low volume.
I still remain bullish over the next twelve months due to the long-term potential of this stock market and the economy based on the earnings, alternative investments, and inflation outlook is still super cheap. So the big pools of frustrated cash in the world still recognize that the S&P 500 remains at historical bargain prices. Cheap prices will not support a bull market unless demand is present and this is what is holding the market back.
It is still prudent to stay cautious but that does not mean that cash or bonds are an alternative. Just remember that the market never forgets but you do. Look what happened last year when the same thing we are discussing now and market is still up. The rule of buy low and sell high has never failed me.
I will be travelling to visit with clients for the next two days but if some break in the standoff comes about I will be calling in some comments. Don’t hold your breath on this happening I still think that the 17Th is the magical day.