By CHRISTINA REXRODE and MARK JEWELL
NEW YORK (AP) â¿¿ You've heard the predictions for what happens if the country goes over the "fiscal cliff": The economy will shrink, nervous consumers will stop spending, and the stock market will plunge.
But those doomsday predictions are overblown, some professional investors say.
Even if Congress and the White House can't reach a deal, the higher taxes and lower government spending that would follow would kick in only gradually. A recession is not guaranteed.What's much more important to the stock market, the experts say, are economic fundamentals. "History has shown that the economy is going to do what the economy is going to do," says Scott Carmack, co-portfolio manager at Leader Capital in Portland, Ore. "And politics don't create some sort of disaster." Whatever happens, the "fiscal cliff" â¿¿ sweeping tax increases and government spending cuts set to take effect Jan. 1 â¿¿ is going to dominate the headlines and the market for the next week. The Associated Press posed a few big questions to investing experts. Q: What's going to happen in the stock market between now and the budget deadline of Dec. 31? The market hates uncertainty. If there's no deal next week, expect stocks to fall. "We always knew we were going to get some volatility here," Carmack says. "Depending on leaders in Washington to come to some kind of agreement is like pulling teeth." Besides, there are other incentives for people to pull money out of the market. Some professional investors are selling to lock in gains for the year. Others are selling because investments could be taxed at higher rates next year. "It's been a pretty good year in the market," says Peter Tuz, co-manager of the Chase Growth and Chase Mid Cap Growth mutual funds in Charlottesville, Va. The Standard & Poor's 500 index is up more than 13 percent in 2012.