Bottom line — unless we start to see the US economy producing at least 200-250k jobs a month, the unemployment rate is likely to fall very slowly. That means that the Fed will likely keep rates low and further expand its balance sheet for the foreseeable future.
-Russ Koesterich, global chief investment strategist, BlackRock
Investors are stuck between a rock and a hard place: They’re trying to plan for the end of 2012, while also looking ahead to 2013. It’s being reflected in the questions I’m getting from clients right now, who are worried both about the fiscal cliff and the outlook for interest rates in 2013
As we saw last week, the markets are focused on every utterance out of Washington on the fiscal cliff. For better or worse, this is unlikely to change until we have a deal. And in terms of getting to one, the truth is we did not see much progress last week.
Moreover, it is important to note that, while investors are focused on getting something done by year’s end, a more important deadline may be Christmas Eve. There are roughly 80 Congressman and Senators who will not be returning to Washington next year and many of them plan to leave before the holiday, suggesting that a deal has to be in place by the 24th. That means the parties are going to need to start to move if a compromise is to be reached in time.
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