There’s been plenty of talk about the fiscal cliff and how the end of the year is a key period for investors. Well, that timeline may not be quite right.
The fiscal cliff refers to the tax cuts and spending programs that are set to expire at the very beginning of 2013. And there's been a lot of talk about how the period after the election but before the end of the year could be volatile as lawmakers grapple with what to do.
However, we’re hearing the ripple from those headwinds will likely blow across the economy and by proxy the stock market sooner than the end of the year – much sooner.
“We really think it’s going to start hitting in the third quarter – and build from there,” says Michael Hanson, Bank of America economist during an interview on CNBC’s Fast Money.
He compares the fiscal cliff to a hurricane.
“You don’t board up the windows when the storm hits, you do it when you hear the storm is coming. “We think the fiscal cliff impacts the market not on December 31st but months before.”
To make the situation all the more perilous, Hanson doesn’t think the Street is properly factoring in the preparations that companies will have to make.