Three out of four global investors expect President Barack Obama and congressional leaders to reach a short-term agreement to avert more than $600 billion in spending cuts and tax increases scheduled to begin on Jan. 1.
Only 6 percent of investors anticipate a political impasse that would send the U.S. economy over the so-called fiscal cliff and into a recession, according to a Bloomberg Global Poll conducted on Nov. 27.
“Both sides understand the importance of striking a deal, increasing taxes and cutting entitlements,” says Richard Salerno, director of fixed income for Kovitz Management Corp. in Chicago, in a follow-up interview. “The market just wants to know the rules going forward so they can move on and begin to lift us out of our fiscal mess.”
The survey of 862 Bloomberg customers who are investors, traders or analysts found that 40 percent expect financial markets to rise after a short-term tax-and-spending deal. An additional 28 percent forecast no significant market reaction while 26 percent say markets would fall, seeing a short-term deal as delaying an unavoidable day of reckoning with the country’s finances.
On Nov. 20, Federal Reserve Board Chairman Ben S. Bernanke, who enjoys a 65 percent approval rating in the Bloomberg poll, warned that failure to reach an agreement before the end of the year “would pose a substantial threat to the recovery.”
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