RBA right, Congress wrong
by Peter Switzer
One fear has been beaten — the Reserve Bank (RBA) being stupid enough not to cut rates before Christmas — but now the idiocy of the US Congress is the next stress point we have to deal with before the festive season is upon us.
Fortunately, fear and loathing about the fiscal cliff negotiations are still at low levels with the Dow only down 13.82 points or 0.11 per cent to 12,951.78 while the S&P 500 lost 2.41 points or 0.17 per cent to wind up at 1407.05. The 1400-point level is a support and then we go to 1385, which is the 200-day moving average, which the market is above. This is a good sign but a left-field event created by Congress is the risk.
I reckon we’re getting closer to a situation where President Barack Obama and Republican speaker, John Boehner start upping the pressure on tax increases versus spending cuts and this could hurt stock prices.
Of course, they could surprise us by being really sensible but they don’t call this the silly season for nothing!
Already the President has said no to the Republican’s idea of tax changes to pump up revenue by $800 billion while ripping $600 billion out of health care outlays.
Fiscal cliff aside, the next big market issue will be the jobs report which comes out on Friday but I still think this will be a sideshow until the fiscal fighting is over.
Fortunately the RBA cut the cash rate yesterday and now we wait for the banks to respond. Bank of Queensland cut its home loan rate by 20 basis points but then ING Direct passed on the full 0.25 per cent.
I’m getting more optimistic on 2013 with the European and Chinese economies and governments taking steps in the right direction, and it coincides with the US economy definitely improving. Only the Congress can screw this up and I worry about the extreme right-wingers in the Republican Party who are economic knuckleheads.
Locally the RBA has given our economy a leg up with its right move yesterday and if Congress gets over its wrong-headed arguments, then I will be very positive on stocks for 2013.
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Published on: Wednesday, December 05, 2012
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