Will the Obama victory harm the trend of stronger-than-expected U.S. data in November?
I venture that the trend is likely at risk as "fiscal cliff" talk dominates, since this will potentially trigger new business adjustments by companies. Remember, sentiment on the fiscal cliff's harmful endgame leads over its actual arrival, and the moment is upon us to begin pricing in this sucker. Upside risk: Grand bargain talk gains traction. However, this seems to be a remote probability in a polarized status-quo Congress and uncertainty on whether a "New Obama" will emerge.
We've seen positive signs in industrial-survey new orders, and within industrial companies at the end of the third quarter. With election certainty, but no policy certainty, are these likely to be sustained in the fourth quarter?
There is risk here, as well, given the aforementioned negative fiscal-cliff feedback loop.
Is the market psychologically prepared for surprise factors unrelated to the bigger chunks of fiscal cliff?
Again, we're seeing a litany of risks at play. Allow me to illustrate by using a couple exit-poll takeaways. First, according to CNN
, voters harbored minimal concerns on the prospect of higher taxes; let's see that hold true when the payroll tax goes bye-bye and the capital-gains tax heads higher.
Second, more voters expressed that they were either in the same financial shape as they were four years ago, or worse off. How this reads is that economic growth remains in a tight range, provided that the job market does not begin to self-sustain at 250,000 gains a month. In a tight-range economy, the gross domestic product estimates being discussed for the second half of 2013 -- 4% growth -- are so out of reach it's laughable. Risks are weighed to the downside in the near-term.
The attack plan, you ask? Well I, for one, am moving back to being short-term negative on stocks after I survived with an optimistic stance following the October employment report. Explanations include the following.
- It's difficult to imagine that money will aggressively flow into a market that now has to contend with significant headline risk from a U.S. economy that had been improving, and offsetting Europe. Pardon me if I have debt-ceiling flashbacks.
- The election outcome, from president to congressional, offers no confidence in fourth-quarter earnings being materially stronger vs. the third quarter. If anything, the risk is skewed to the opposite.
I think a valid course of action would be buying protection to this volatility by going long SPDR Gold Shares (GLD)
. The single thesis I see that has staying power would be a dollar-debasement policy from a Fed led by Ben Bernanke (or someone like him being appointed). That would benefit hard assets.
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