This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Fiscal Cliff Fallout Winners from KBW

NEW YORK ( TheStreet) -- While President Obama and the beloved members of Congress are focused on the November elections, the looming "Fiscal Cliff" is of paramount importance to the economy.

As part of a grand bargain between both major parties and the president to raise the federal debt ceiling, the Budget Control Act of 2011 -- signed into law by President Obama in August 2011 -- a mandatory set of budget cuts, together with the expiration of tax cuts enacted when George W. Bush was president, and then extended in 2010, "will push the U.S. into a recession in the first half of 2013," according to KBW analyst Fred Cannon, unless Congress and the president once again kick the can down the road.

Since the only thing that matters to most members of Congress is the subsequent election cycle, it would seem most likely that another bill will be passed to prevent the federal spending cuts and to extend the tax cuts once again, but one never knows. The bitterness between the parties, together with the election results, could indeed push us over the fiscal cliff.

For income seeking investors, TheStreet recently covered the significant tax implications that will affect investors unless Congress extends the tax cuts, as well as several choices to maximize dividend income under various scenarios.

KBW's "base-case economic outlook" assumes that Congress and the president will take the necessary actions to avoid the fiscal cliff, but Cannon said that even under that "even if the fiscal cliff is addressed by Congress, we believe that the December debate on the issue will be negative for consumer confidence and will slow spending." After that, assuming that we don't fall off the fiscal cliff, KBW expects the economy to "[reaccelerate] in 2013, ending the year with 2.2% GDP growth and the unemployment rate at 7.3%."

"Under the fiscal cliff alternative scenario, we would expect the U.S. to fall into a recession in the first half of 2013, with negative GDP growth and the year ending with the unemployment rate at 9.1%," Cannon said, adding that "interest rates stay low under both scenarios, but in the fiscal cliff alternative, we would expect the 10-year Treasury yield to drop below 1% early in 2013."
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
ADS $203.31 0.00%
MA $96.99 0.00%
MTB $118.32 0.00%
USB $42.69 0.00%
V $77.24 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs