No Brakes Ahead of the Fiscal Cliff

Say what you will about Bernanke, but if this whole central bank gig doesn’t work out, he might have a future in writing catch phrases. Ever since he used the phrase “fiscal cliff” to describe the combination of tax hikes and spending cuts that will automatically kick in unless Congress acts by the end of the year, it’s rapidly become a household term (at least in our households). Judging by Google search traffic for the term, we’re not alone:

Fiscal Cliff Google search trends

It also happens to be the perfect encapsulation of the collective fear for the future of the US economy – that we’re careening toward disaster.

At least, that’s been the dominant narrative over the past few months. But talk, as they say, is cheap. When it comes to actual behavior, we’re just not seeing as much as we expected of investors or companies bracing for impact. Stocks are at or near 2012 highs, and hiring trends have been positive, if tepid. Via Bloomberg:

A pullback in business investment had fanned concerns that companies would begin to pare hiring in anticipation of $600 billion in government spending cuts and tax increases at the start of 2013. The Congressional Budget Office has warned the economy will fall into recession if Congress allows the fiscal squeeze to go ahead.

The jobs numbers suggest the economy is expanding at a “trend-like pace” of around 2 percent, Kasman said. That would be in line with the 2.2 percent average quarterly growth rate of gross domestic product since the 18-month recession ended in June 2009.

Obviously, going over the fiscal cliff is not a certainty – Congress could always step up and pass a “grand bargain” to avoid the automatic cuts. It’s just that, well, given the dysfunction in DC over the last few years, we’re surprised that any Americans are willing to bank on an 11th hour compromise. Beyond the hiring figures, there may be some indication that businesses are concerned:

“Uncertainty around the fiscal cliff has already caused firms to postpone capital-goods orders,” Joshua Dennerlein, U.S. economist for Bank of America Corp. in New York, said in a note after the release of the jobs numbers.

Shipments of nondefense capital equipment excluding airplanes, a proxy for business investment, fell 0.9 percent in August after decreasing 1.1 percent in July, according to Commerce Department figures.

But overall, it looks like the fiscal cliff is not yet being treated as a likely outcome. Whether that will change once zero hour draws near remains to be seen.

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

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