Did the Fiscal Cliff Really Charge the Market?
House Speaker John Boehner (R., Ohio) also made remarks that specifically called out Democrats and said they had to "get serious" about the spending problem. Though Obama and Boehner reiterated on Wednesday their beliefs that both sides could come to an agreement, the challenge by the speaker for Democrats to offer serious spending cuts is a vital roadblock to solving the whole cliff.
Central to this discussion is what Democrats are willing to cut, and what changes in tax-related issues that Republicans are willing to submit. Officials familiar with White House strategy are aware that certain Democrats have shown unwillingness to accept significant entitlement spending cuts, according to Politico.
Frank Fantozzi, chief executive of Planned Financial Services, said that he thinks Republicans will eventually be willing to consider increases in tax rates -- dividends, capital gains, upper marginal income rates -- but that these will be offset by concessions to Democrats on caps in deductions.
"I'd be surprised that we get something resolved by the end of the year; we've been telling our clients 'don't plan on it,'" said Fantozzi. "So I think the compromise is going to come in the first quarter ... what the president will probably do with the help of the Senate and everything else is make some short-term adjustments."It also may be important to note that economic indicators this week have hinted at a strengthening U.S. economy. "What's more, each slightly better-than-expected economic report that is ignored by investors who are focused almost exclusively on the cliff, may serve as an additional turn of the winch that may ultimately catapult equity prices progressively higher once investors feel confident that an improving economy won't be derailed," Sam Stovall, chief equity strategist at S&P Capital IQ, wrote in a note late Wednesday evening. While the president's remarks may have been one factor that contributed to an uptick in equities on Wednesday, there was enough cynicism from Boehner that could have reasonably knocked back the surge. (Some market headlines credited Senate Majority Leader Harry Reid's (D., Nev.) pessimistic remarks on Tuesday with slugging the major indices in late afternoon trades.)
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