Regional Specialists Review January 2013
The year 2012 and the dreaded "fiscal cliff" drama culminated with a political fizzle while stock prices rallied robustly. Unfortunately, the fiscal fight continues.
As we expected, the GOP avoided/postponed the battlefield of the debt ceiling - which carries too much financial market and political risk - and will use government spending authority, expiring at the end of March, as the lever to force an agreement emphasizing spending cuts. In this scenario we could well see a temporary government shut down and even sequestration - automatic spending cuts nearing $1.2 trillion hitting both defense and non-defense programs.