As fiscal cliff nears, market complacency sets in
“I didn’t think good things would come out of the comment,” said Petzel, the chief investment officer at Offit Capital Advisors in New York. “But nothing happened.”
The rhetoric heated up again on Friday, when Republican House Speaker John Boehner accused US President Barack Obama of “slow-walking” the economy to the edge of the cliff. Again, markets brushed it off and showed very little reaction.
Investors’ collective shrug marks a stark change from how they had behaved in the two weeks after the presidential election, when nearly every utterance from a politician about the looming budget crisis caused wild swings in stock prices.
The S&P 500 index has nearly retraced the 5.3% slide it suffered in the first seven sessions after the November 6 vote. Some of the rebound reflects market confidence that Democrats and Republicans, despite their rhetoric, will eventually agree on at least a short-term deal to avoid the cliff - nearly $600 billion of tax increases and spending cuts set to take effect in January that could bring on a new recession.
It also could be that investors have peered over the cliff and realised they are looking at a gentle slope instead. “The sentiment has definitely changed,” said Andrew Wilkinson, chief economic strategist at Miller
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