United States rapidly approaching the "fiscal cliff"
At the end of last year I expressed my belief that high-yield low-beta stocks represented a solid opportunity for income generation with historically less risk than other investment vehicles. Since then, volatility has continued to rise as uncertainty has flowed from all corners of the globe, leaving investors with few strong growth opportunities. Continued domestic issues, festering problems in the Eurozone, and a marked slowdown from the world’s top performers will likely cause this trend to continue for the foreseeable future.
- The United States is rapidly approaching what has come to be referred to as the “fiscal cliff”. Unless congress acts, $1.2 trillion of automatic spending cuts will be initiated on January 1st. At the same time, the Bush-era tax cuts will expire, raising the burden on the American people while at the same time greatly weakening support mechanisms . According to the Congressional Budget Office, such an event could lead to a mild recession in 2013 .
- The possibility of Greece being forced to leave the Eurozone seems increasingly probable. Indeed, Angela Merkel recently said “What we have always said is that we want Greece to remain a member of the Eurozone. The precondition for that to succeed is that the future Greek government sticks to the memorandum that was agreed with the International Monetary Fund, European Central Bank and the European Commission.”
- A possible “hard landing” for China is again becoming a topic of conversation amidst concerns that their recent explosive expansion is unsustainable. The People’s Bank of China cut the official borrowing rate and the one year deposit rate in the country by 25 basis points each in June in an effort to counteract rapidly slowing growth in the first half of 2012 . Increases in government expenditures, either directly or through state owned enterprises, have typically been another stimulus tool employed by the Chinese government. However, some analysts are concerned that such remark-ably high levels of spending may lead to overinvestment.
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Securities offered through Securities America Inc., Member FINRA/SIPC and advisory services offered through Securities America Advisors, Inc. Armstrong Advisory Group and the Securities America companies are unaffiliated. Representatives of Securities America, Inc. do not provide legal or tax advice. Please consult with a local attorney or tax advisor who is familiar with the particular laws of your state. 6/12
The San Francisco Chronicle Online Hunter, Kathleen & Przyblyla, Heidi. “Senate Group Steps Up Efforts to Avoid Year-End Fiscal Cliff”. 7 Jun 2012. 11 Jun 2012.
The Wall Street Journal Online Paletta, Damian. “CBO Sees 2013 Recession risk”. 23 May 2012. 11 Jun 2012.
Ekathimerini.com: News “Merkel says Greece must stick to commitments”. 8 Jun 2012. 11 Jun 2012.
Reuters.com Edwards, Nick. “China rate cut sparks fear of grim May data”. 8 Jun 2012. 11 Jun 2012.
Securities offered through Securities America, Inc. Member FINRA / SIPC. Advisory Services offered through Securities America Advisors, Inc., an SEC Registered Investment Adviser. Armstrong Advisory Group and the Securities America companies are unaffiliated.
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