Wall Street reacted to President Obama and House Speaker John Boehner’s comments, which failed to offer any convincing evidence that the fiscal cliff can be avoided. According to Reuters on Friday, Nov. 9, 2012, both the S&P and the Nasdaq had risen one percent around midday, but then Boehner and Obama offered up their unchanged positions this gave Wall Street the reason to believe that a compromise is still out of reach. This in turn saw Wall Street “off highs” after Obama’s comments.
Boehner called on Obama to lead the efforts to avoid the fiscal cliff, but took the same stand against increasing the taxes for the wealthy. Obama later invited the congressional leaders to the White House to start in the negotiations in a deal to avoid the fiscal cliff. He remained adamant on his stand for wanting higher taxes for the wealthy. So there you have it, it doesn’t look as if a thing has changed. This also seems to be the mindset of Wall Street, nothing has changed and not a hint of a rescue is seen for the dreaded fiscal cliff.
Mohannad Aama, managing director of Beam Capitol Management LLC in New York said,
“Investors were disappointed. There was anticipation that there may be more willingness to compromise, but just like Boehner did earlier in the day, both camps stuck to their lines in the sand, so to speak.”
With the potential for higher taxes looming in the near future, this is pushing investors to sell both losing and winning stocks for the year. They are trying to decrease the tax impact from their positions this year and next with this potential, and some worry probable, higher tax rates in 2013.
The market bounced back this morning, but now that both Obama and Boehner have held fast to their views and it looks like a compromise is far from seeing the light of day, investors are worried and this worry will no doubt be reflected in Wall Street trading in the coming weeks.
According to Mercury News, the market just experienced its worst two-day slide in a year. The Dow average plunged 434 since the election put President Barack Obama back in office for another four years. The focus of investors is now on the deadline at the end of the year for Congress to act on reducing the budget deficit.
Unless the Congress acts to change the law, the fiscal cliff, which is a combination of government spending cuts and tax increases, will take effect early next year. It’s feared this could take an estimated $600 billion out of the economy and push the economy into a recession.
Reference: Reuters, Mercury News