People Are Getting Extremely Optimistic And Ignoring The No. 1 Threat To Stocks. New Payroll Tax Increase Is Crashing US Economy REAL-TIME! Wal-Mart: There’s No Reason To Be Optimistic, Customers Are Working Hard To Adapt To The ‘New Normal!
February 15th, 2013
Why the Market’s Ignoring the No. 1 Threat to Stocks
Investors who fled in fear over potentially massive tax increases associated with the “fiscal cliff” have barely broken a sweat over corresponding spending cuts that are only two weeks away.
The so-called sequestration of $110 billion a year in discretionary spending will happen March 1 if Congress does not come to an agreement.
With little indication that Washington is anywhere near a compromise similar to the one that avoided the full brunt of the fiscal cliff, markets could be expected to be in full panic mode.
Sentiment surveys and fund flows remain strongly bullish, and Citigroup’s Panic/Euphoria model is near euphoria stage, according to Tobias Levkovich, Citi’s chief equity strategist.
“Given potentially bitter fiscal policy battles linked to required tax and spending reforms in March, we expect some volatility in the next couple of months,” Levkovich said in a report. “However, our outlook for 2013 remains attractive given signals from valuation, implied earnings growth and credit conditions to name a few factors.”
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