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Blame Obama

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by Peter Switzer

The fiscal cliff keeps pushing share prices down and the arrival of some disappointing economic data didn’t help the cause of those hoping for a small pullback. But let’s face it, stocks will trend down until President Barack Obama and the Republicans in the Congress are close to unity on key issues, so get used to this for a few weeks.

That said, when things start looking positive, stocks will spike, so for those like me who are waiting to get stocks I like at lower prices, the big challenge is to time it.

Data watch

In a surprise, the Philadelphia Federal Reserve Bank’s business activity index went from 5.7 to -10.7 in November but there was a little problem called Sandy — the hurricane — that had a fair bit to do with it!

Meanwhile the Empire State manufacturing activity index for the state of New York actually rose to -5.22 in November, according to the New York Federal Reserve Bank.

Also inflation ticked up, which in a beaten up economy is a good thing as long as it doesn’t get out of control.

To Europe and the eurozone went into recession according to official data and the Middle East isn’t helping market confidence but the main game is Obama and his tax wrangling.

Wishful thinking

From the negotiation bunker, Obama has offered to extend the Bush tax cuts to all but the wealthiest Americans and he says he will do wrangling over other tax matters later. This strategy would take away a drop over the cliff for the economy but the Republicans are suspicious of a vote now and change tax later deal.

And on tax issues, some of this sell off is from Americans who think that taxes on share profits will rise, and so they’re banking their wins under the current tax regime. This underlines why a quick settlement is needed but this is wishful thinking.

The only way I can deal with this US-created annoyance is to see it as a buying opportunity, but that brings the challenge, when do I dive in?

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Friday, November 16, 2012

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