Lawmakers Shovel Sand on Grave of Investor Confidence

December 27, 2012 9:18 AM EST Send to a Friend
It has been Weeks! Months! Years! And still lawmakers in Washington are unable to reach a deal on the fiscal cliff. The gridlock has left many investors, business owners, and everyday Americans with their heads hung low in disappointment – though for the time being panic remains in check.

The drama was heightened yesterday when Treasury Secretary Geithner announced the U.S. was nearing its debt limit, resurrecting fear of another U.S. debt downgrade. Still investors remained stoic, as most expect politicians to punt the tough decisions until later this year.

“We note that the cliff deal will likely take the form of a medium-term punt setting the stage for additional deficit reduction in a larger 'grand bargain' later in 2013," said analysts at FBR Capital.

'Grand bargain' might be a bit of a misnomer considering very low expectations. 'Grand chagrin' maybe? Or maybe 'grand catastrophe’? Either way, it doesn't look good.

"If we go off the cliff, even temporarily, we believe investor confidence will be very low for the ability of Congress to complete the grand bargain in 2013," said FBR. "This could take a significant sheen off of the temporary fiscal cliff deal and could increase investor concern about any long-term fiscal solution on entitlement, individual tax, and corporate tax reform."


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