Equities have got off to a flying start to 2013 but do I believe that the surge will continue? Sort of Yes and sort on No. It is complicated. I certainly do not assume that buying any old stock and expecting it to surge will be a way to make money this year. It never is and 2013 will be tough in many ways.
Part of the early January surge is a relief rally thanks to the US not falling off the Fiscal Cliff. Well not yet anyway. Tough decisions with regard to spending have not been taken, merely postponed. The fundamental issue of America’s deficit and its ever growing debt has not been addressed; Ron Paul puts it thus:
Under the sequestration plan, government spending will increase by 1.6 trillion over the next eight years. Congress calls this a cut because without sequestration spending will increase by 1.7 trillion over the same time frame. Either way it is an increase in spending.
Yet even these minuscule cuts in the “projected rate of spending” were too much for Washington politicians to bear. The last minute “deal” was the worst of both worlds: higher taxes on nearly all Americans now and a promise to revisit these modest reductions in spending growth two months down the road. We were here before, when in 2011 Republicans demanded these automatic modest decreases in government spending down the road in exchange for a massive increase in the debt ceiling. As the time drew closer, both parties clamored to avoid even these modest moves. Make no mistake: the spending addiction is a bipartisan problem.Comments