Stocks, commodities and treasury yields all moving higher. Does this mean the
economy is improving or the Fed’s money printing machine is providing the fuel? Jury still out.
Resistance is 1480 using the S&P 500. Important support is cliff low near 1398.
-Bruce Bittles, chief investment strategist, Baird
The equity markets are celebrating measures that allow the economy and the financial markets to avoid the consequences of falling off the fiscal cliff. Of course, the fiscal cliff was a complete fabrication of the political set. The fact that Washington “solved the problem” at the 12th hour was political theater at its worst. Although the tax increase will finance more spending
and not help the economy or fix the country’s debt bubble, there are a few positives worth noting. The bill does permanently fix the Alternative Minimum Tax issue and taxes for the middle class. This is significant because it allows households and small businesses to plan longer term. The next hurdle for the market and economy is the debt limit issue, which is likely to create another opportunity for political hero making. Given the limited scale of the changes in the fiscal landscape, the
Federal Reserve will continue to play a leading role in the economy and equity markets. Unlimited currency printing is not an exclusive strategy of the Federal Reserve. Japan, which has seen a renaissance of its equity markets, is engaged in massive money printing as is the UK, Switzerland and the euro zone. As a result, we anticipate that commodity prices will also benefit in 2013 from a policy of easy money.