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Imminent Fiscal Decisions By Political Leaders Will Have Profound Consequences On Capital Markets And Investment Portfolios, According To BNY Mellon-Sponsored Report

NEW YORK , Dec. 5, 2012 /PRNewswire/ -- The US and European economies will face significant challenges in 2013 and beyond regardless of the scope and direction of imminent fiscal decisions globally, according to a new BNY Mellon-sponsored report from the Economist Intelligence Unit (EIU). The report, Fiscal Decision Time for Political Leaders, examines and details the diverse opinions of leading market watchers and participants.

The report's key findings include: 

  • Experts are divided on whether government leaders will make the tough fiscal decisions necessary to save their economies.  In spite of widespread pessimism, some experts believe US leaders could come up with a "grand compromise" and European leaders could move toward greater fiscal and regulatory union. 
  • Viewing the US "fiscal cliff" as a binary event distorts what's likely to happen.  Although the equity markets would likely rebound if lawmakers achieved structural reform, experts agree that the US is likely to experience a fiscal drag in any case.
  • The European economy faces two major uncertainties:   Will European countries ever submit themselves to outside fiscal control? Will the European Central Bank cut off an ailing country from further support if it fails to meet conditions for its loans, thus triggering the type of panic it seeks to avoid?

"While the threat of a return to financial instability may inspire politicians on both sides of the Atlantic to make the difficult political and fiscal decisions that have been avoided for years, our report details a significant divide of opinions on the decisions that will actually be made and the impact of those decisions," said James P. Palermo, vice chairman and CEO of Global Client Management for BNY Mellon.      

The report is a byproduct of BNY Mellon-sponsored Search for Growth research examining the prospects for economic and market growth from the perspective of both institutional investors and corporate executives. Based on a global survey of almost 800 respondents carried out by the EIU in January 2012, and a series of in-depth interviews with leading investors and experts, the research explores the potential for growth across a wide range of sectors, regions and asset classes. It also explores the likelihood and potential impact of a range of both positive and negative scenarios.

Fiscal Decision Time for Political Leaders is available at http://www.bnymellon.com/foresight/pdf/eiu-fiscal-1212.pdf. More on the Search for Growth research initiative is available at http://www.bnymellon.com/foresight/searchforgrowth.html.



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