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NEW YORK (
TheStreet) -- New Year's Eve has already stolen the country's attention from the so-called fiscal-cliff story that has flooded readers of business and political news since the election.
But with just a few hours from a likely U.S. Senate vote on a deal and a couple of days from a House vote, Americans may take solace that specifics don't matter in the final agreement so long as it passes into law.
"I don't think what is in the agreement is as important as that an agreement is being made," said Sam Stovall, chief equity strategist at S&P Capital IQ. "Nobody wanted to play when there were no rules. Now I guess it doesn't matter what those rules are because people will know how to play."
Company management sat on cash throughout 2012 as an acerbic presidential election unfolded about the economic direction of the country. Capital investment by businesses stalled as a lack of direction on the future of individual and company taxes cloaked CEOs and others.
The fiscal cliff -- when automatic spending cuts and tax hikes go into effect, unless Congress averts the crisis -- had been on the minds of investors for much of the year, but the issue reached full throttle after President Barack Obama's re-election in November.
Reported details of the possible Senate plan include a tax increase -- which may have been the biggest issue of the 2012 election -- to 39.6% from the previous 35% on individuals earning more than $400,000 a year and families making more than $450,000 a year. The payroll tax cut -- which engendered a struggle between the White House and the Republican Congress in the early part of 2012 -- will be allowed to expire. The alternative minimum tax (AMT) -- a bout of contention addressed by Obama and Mitt Romney during the 2012 campaign -- will maintain a permanent patch to keep more citizens from being taxed at the new level.
Stovall said the decision to address the AMT could be a good move as a failure to have it rise each year and Congress' lax from upping the threshold would have put middle class earners in a tough position.
The president had repeatedly called for an extension of unemployment insurance for long-term unemployed as the national unemployment rate remained near 8%. The Senate deal would extend those benefits through 2013. Business tax credits and stimulus tax credits would be extended.
"I think that what this is going to turn out to be is ultimately another round of [quantitative easing] or stimulus, just in a different form," said Tom Power, senior commodities broker at RJO Futures.
What many market analysts agree on is that if a deal passes -- regardless of what legislators agree to on the final specifics -- it will be positive for the economy and for equity markets.
Dow Jones Industrial Average added 1.28%, or 166 points, to 13,104. The blue-chip index gained 7.26% in 2012. The
S&P 500 surged 1.69%, or 24 points, to 1426. The S&P gained 13.41% in 2012. The
Nasdaq spiked 2%, or 59 points, to close the year above 3,000 points at 3019. The tech-heavy index gained 15.91% in 2012 to post the largest increase among the major U.S. equity indices.
"What are you going to do? You have to go into equities," said Michael Gayed, chief investment strategist at Pension Partners LLC. "I always said if Europe didn't bring us down how could the fiscal cliff? It's a smaller number. This is a resilience of the stock market in the context of these incredible negatives."
Gayed said he believed Friday's loss across the major U.S. equity indices had to happen in order to scare legislators enough for them to consider failure to pass a deal as another "TARP reaction" -- a reference to the selloff that followed after Congress initially failed to pass the massive stimulus plan at the outset of the financial crisis in 2008. Gayed also argued we may have gotten closer to a deal on Monday because the realization of a market collapse would have been more damaging to Republican constituents and not the Democrats.
"The rich are not rich because of income; it's because of assets," Gayed said.
The ability by the Senate and House pass a plan this week may signal for the first moment in a couple years that leaders can pass major legislation through bipartisanship. Though investors may have viewed the negotiations as protracted and difficult, it's a sign of certainty.
"It's going to continue to be a very eventful couple months for the fiscal outlook here," said Robert Tipp, chief investment strategist at Prudential Fixed Income. "Passing a minimal package at this point would be a relief and the markets would be buoyed by that."
Pop a bottle of Champagne; it appears Congress finally may have something for us to celebrate other than the New Year.
-- Written by Joe Deaux in New York.