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Smart politicians help stocks

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by Peter Switzer

Dumb politician’s comments sent Wall Street down yesterday and smarter ones used their big mouths to help market sentiment head in a positive direction.

The Dow was up 106.98 points or 0.83 per cent to 12,985.11 while the S&P 500 whacked on 10.99 points or 0.79 per cent to end at 1,409.93.
Yesterday Democrat Harry Reid, the Senate leader, said there was no progress on the fiscal cliff and Wall Street did not like it.

However, overnight President Barack Obama spoke and he got it right.

"My hope is to get this agreement done before Christmas," he said.

Then the Republican boss John Boehner came out and wisely talked about accepting some tax increases provided spending cuts were an option.

This positive negotiation increases belief that a deal will be done before Christmas when many expect the better economic data from the USA will mix in with some better outcomes out of Europe as well as improved growth prospects for China to lay the foundations for a nice end-of-year rally.

Against this there will be sellers who want to nail their capital gain before taxes on shares and gains possibly change with the fiscal cliff negotiations.

On the economy, new home sales dipped in October and the Beige Book, which looks at the progress of the economy, came in as mixed but still suggesting a positive outlook for the economy.

I expect our stock market to go up today but before the fiscal cliff deal is signed, we will see markets driven by headlines, big mouths and short-term players trying to make money out of the volatility.

I am punting on a couple of bad days to buy some stocks I like, but if I miss out, the stocks I hold will be all the better for the rally. Provided the cliff is fenced off, and it will be, I am in a win-win position.

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: Thursday, November 29, 2012

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Ignore stupid recession headlines

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