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Political Status Quo Shakes Up the Market

November 12, 2012

 

Obama must now address the looming "fiscal cliff" and will need to work with lawmakers to avoid more than $600 billion of tax increases and spending cuts (i.e., sequestration) that could do further damage to an already fragile U.S. economy.
-John Toohey, vice president of equity investments, USAA Investments

 

  • Post-election, President Obama must now address the looming “fiscal cliff” in order to prevent further damage to an already fragile U.S. economy. In addition, the debt ceiling will soon need to be raised and any delay could result in a downgrade to the country’s credit.
  • The S&P 500 and U.S. Treasury notes fell last week. Adding to the angst, ECB president Mario Draghi stated that economic activity in the Eurozone is expected to remain weak.
  • With the continued uncertainty, the USAA team is remaining cautious by holding an underweight or neutral-weight position in all risk asset classes. The one notable exception is precious metals. The team is overweight in investment-grade fixed income and cash and will continue monitoring events to reposition as necessary.

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