'Fiscal Cliff' May Make Europe Look Like a Dip
"The next words out of everyone's mouth will be, 'What about the fiscal cliff?'" said Art Hogan, managing director at Lazard Capital Markets in New York. "Right now, it's running a close second in terms of market participants' concerns. It will take the lead as soon as we get some resolution or some near-term answers from Europe."
From Hogan's view, there is actually a bright side: If the market's overriding view is that Congress won't be able to get anything done, agreement on at least some of the key issues could provide a positive surprise. He said record low yields on the 10-year Treasury and a recent surge in gold buying have shown investors' pessimism regarding the mess in Washington.
Agreement will come, he said, in the form of an extension of the tax cuts before the election, with the most difficult decisions made after voters make their choice for president.
"I have a sense that we're going to address this, that we're not going to drive off a cliff at 100 mph into a double-dip recession," Hogan said. "The market's not prepared for that. That's where the upside risk is in the marketplace."