Home > Uncategorized > 2012/11/13: Quick Post: Weekly Calendar and Perspective: All as expected on equities choppy grind lower

2012/11/13: Quick Post: Weekly Calendar and Perspective: All as expected on equities choppy grind lower

© 2012 ROHR International, Inc. All International rights reserved.

The weekly Report & Event Calendar along with the Weekly Summary Perspective are available through the links in the right hand column. The Perspective sums up what has been the anticipated reaction to last week’s re-election of the President. As we immediately noted when the election outcome became clear last Tuesday evening, it was the “worst case scenario.”

That is not a partisan statement intended to disparage the President. It was just that an ineffective highly, partisan split Congress with a President who got only the slightest majority of the popular vote was going to be problematic. That’s a prescription for a higher risk of actually heading over the Fiscal Cliff in January. At the very least, this is left us with a level of uncertainty that has created highly volatile, low liquidity markets. That was one of the main topics of discussion when I cohosted Jack Bouroudjian’s Jack B. Show today, extending into the still less than constructive influence out of Europe. Thanks to Jack for exploring all that.

That has left us rightfully bearish in the near-term on equities. And spite of the continued risk to the US credit rating already foreshadowed by the key rating agencies, that was going to also leave us perversely friendly to core government bond markets, as well as the US dollar. The dilemma is that a sharp lurch into even weaker growth (or possibly even renewed recession) by the US would only exacerbate the very weak tendencies elsewhere.

Europe is still seeing a lot of stress not just from the inherent Sovereign Debt Crisis, but also from the dissension within its ranks and with the Non-Governmental Organizations (NGOs.) The most recent manifestation of that was cited by Tyler Durden in his Zero Hedge blog (link to that in The Blogroll in the right-hand sidebar.) This is excerpted directly from his assessment of the situation:

“…IMF head Lagarde and pathological liar and chair of the Europe’s mostly broke Finance Minister, Jean-Claude Juncker, openly disagreed with each other, an event even the FT called a “feud” after they proposed two alternative visions for Greece, one which envisioned the 120% debt/GDP debt target goal pushed forward to 2022 (for Juncker), and on the other hand, IMF, which has been humiliated enough with its horrible predictions, and which refuses to budge from its 2020 Greek target. Per the FT: “In a rare breach, Mr Juncker told a post-meeting press conference the target would be moved to 2022, prompting Ms Lagarde to insist the IMF was sticking to the original timeline. When Mr Juncker again insisted it would be moved – “I’m not joking,” he said – Ms Lagarde appeared exasperated, rolling her eyes and shaking her head. “In our view, the appropriate timetable is 120 per cent by 2020,” Ms Lagarde said. “We clearly have different views.” ”

So, it is not a huge surprise that the equities are still nervously seeking lower ground during this unsettled phase. As we and mostly everybody else expect more of the recent lack of consensus to continue in Europe, that means the US Fiscal Cliff negotiation will the key to whether the equity markets can stabilize and rebound. And while we believe there will still be significant headwinds for the US economy and global markets into next year, any avoidance of the sharp US spending cuts and tax increases in January of next year will likely bring a significant relief rally. And that is likely to be reinforced by late year window dressing from portfolio managers who have played it cautious, and have cash on the sidelines they will want to commit prior to the end of the year.

The rest of our views are all in the Weekly Report & Event Summary Perspective, and we hope you enjoy the read and extended market insights.

Thanks for your interest.

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