Fiscal Cliff

By Jason Fittler

With a last minute announcement the Fiscal Cliff was sorted... or so it would seem.

But there are still problems in the US that need to be addressed prior to seeing a Bull market return. All indications are that we should continue to be underweight in the US and that 2013 will see the volatility in the markets remain.

So what was fixed?

  1. One year extension of unemployment benefits
  2. One year freeze on scheduled cuts in doctors Medicare payments
  3. Five year extension on stimulus related spending cuts

The deal did not include.

  1. Any no entitlements reform
  2. Any restructuring of personal or corporate tax codes

What does this mean?

  1. Lower economic growth now expected, growth is not expected to get back to 2%.

2013 will continue to be a bumpy ride for investors as there are plenty of economic issues to work through in the US, Europe and at home. Given that the US and Australian governments have problems with their debt ceilings, you can expect that we will see further spending cuts.

It is clear that raising taxes will not be a future solution to government over spending. The Mining Tax in Australia seems to be proving this point.