Congress passed their fiscal cliff deal; markets responded with glee.
In investor offices across the country questions flow into email inboxes. People want to know how the markets will bear the solution out.
President of Investor’s Resouce, a partner of Raymond James, Shari Burnum says, “A lot of people are emailing saying what are the ramifications of this fiscal cliff thing, and they’re all wondering and thinking, ‘Is the sky going to fall tomorrow?'”
Stocks shot sky-high today, making it seem unlikely that same sky could fall tomorrow.
Burnum explains, “Immediately, we can’t figure out why the market is going up. Because the long-term ramifications of all of this are we really haven’t solved the problem.”
Congress hasn’t fixed this problem once and for all. In fact, they’re not even close.
Burnum adds, “The market does love certainty, and that is the one thing that has come out of all of this. Like it or not, things are much more set. You can make decisions on your business. You can make decisions on your estate planning. You can make decisions on how to invest.”
Still, they’ve left plenty on the plate of the next Congress.
Burnum points out, “We really haven’t addressed the long-term problem. We’ve got $16 trillion dollars worth of debt. We just handled $600 billion of it. Big deal.”
And Congress will barely get to catch their collective breath before they have to handle sequestration – a broadside of spending cuts that will take hold in two months unless congress agrees otherwise.
Burnum says it’s part of a much larger crisis, “Sequestration is a big deal, and I know that locally, people are really, really focused on that issue. But the broader issue is not just sequestration. The broader issue is spending cuts in general.”
Sequestration could impact some local companies heavily. After all, half of the cuts at stake impact defense spending.
Still – this expert thinks Congress will have to fight the deficit through spending cuts or else the whole economy could suffer.
“We’ve got to close that gap or our credit rating as a country on our bonds very well might come down,” she explains.
So if congress lets sequestration happen, it could hurt, but it could also make a dent in a larger problem.
Burnum concludes, “In all likelihood, markets are going to back up for a little bit if all of that happens, because everybody’s going to feel that immediate pain. But yet, it’s that immediate pain that we need.”
Regardless, sequestration is sure to spark months of debate.