This Day On The Street
Continue to site
ADVERTISEMENT
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

Go Over the Cliff? May Be Best Thing

NEW YORK ( TheStreet) -- This year's stock market strength was caused by the continued anticipation of additional Federal Reserve Quantitative Easing programs. When it came to QE3 I thought the market had rallied too far too fast and opined that this anticipation was factored in by mid-September.

To me it was a case of buy in anticipation, sell on the news. QE3 was announced on Sept. 13, and most stocks, ETFs and equity averages peaked between Sept. 14 and Sept. 21.

As the stock market began to become infected with "QE fatigue", the focus shifted to the pending "fiscal cliff". On Election Day stocks had a strong rally in anticipation that Mitt Romney would pull out a victory, but when President Obama won a second term stocks took it on the chin and "QE fatigue" became an epidemic. With this week's weakness and market concerns around the world this epidemic has become a pandemic.

All major equity averages and all sector ETFs I track have negative weekly chart profiles. Without any safe sectors the epidemic of "QE Fatigue" can be justifiably called a pandemic, as there are no safe havens in the equity markets.

The background to the "fiscal cliff" began with the Budget Control Act, which became law because of the partisan stalemate in Washington, DC. Democrats and Republicans could not agree on how to cut the budget deficit. This law calls for across-the-board spending cuts, "sequestration" to most discretionary programs. In addition, the law specifies the Bush-era tax cuts expire as 2013 begins.

President Obama wants the tax cuts to end for families making more than $250,000 per year, or $200,000 for individuals. The House Republicans do not want any tax rate hikes but seek to overhaul the entire tax code. If the Republicans agree to keep middle-class tax rates unchanged and raise those on the so-called wealthy, they lose their bargaining chip.

In my opinion, the Budget Control Act was the country's insurance policy that America would take action to reduce the uncontrollable budget deficit and growing debt. It's the act that forces austerity.

1 of 2

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
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $130.28 0.47%
FB $81.53 -1.07%
GOOG $565.06 3.30%
TSLA $218.42 -0.08%
YHOO $44.52 1.89%

Markets

DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs