Investors Shun US Markets Due to 'Cliff": Goldman’s O’Neill

Jim O'Neill
Ben Stanstall | AFP | Getty Images

The looming "fiscal cliff" is causing the first signs of a shift away from U.S. markets into Europe, said Jim O'Neill, chairman of Goldman Sachs Asset Management.

"More and more longer-term investors are being influenced by [the fiscal cliff impasse] and are starting to think Europe has dealt with some of its long-term issues, even though the economies are weak." O'Neill told CNBC's "Squawk Box" on Monday. "I detect the first signs of people shifting more towards Europe from the U.S."

He also referred to the talks over the fiscal cliff as business as usual in the nation's capital. "It's like a never-ending game in Washington," he said. "It's a bit farcical, really."

O'Neill expects the negotiations to go down to the wire. If there's no deal by year end, he said, the markets will view that as temporary. "If there's not a deal, no doubt there will be a deal two weeks later" sometime before the inauguration in late January.

'Never Let a Crisis Go to Waste': Goldman's O'Neill

But the markets also have a seat at the table. "Never let a good crisis go to waste," O'Neill said. "It's usually when markets put governments under the [gun], that's when they start to deal with things."

O'Neill pointed out that the divided Congress makes it tough to solve the debt and spending problems, and that the U.S. could learn from Europe about compromise. "Many European countries have been dealing with coalition governments for some time" and maybe that's what America needs to do.

The fiscal crisis in the U.S. comes amid signs that China's economy is improving after seven quarters of slowing growth. The manufacturing sector there increased for the first time in 13 months in November, according to the latest Purchasing Managers' Surveys.

"It looks like the world's gone into the fourth quarter stronger than it was in Q3," O'Neill said.