"I think in the end we will see some resolution, some compromise," says Mark Luschini, chief investment officer at Janney Capital Management of the current Congressional impasse that's dominating the headlines and providing endless fodder for the media.
As predictable as the 2013 version of the budget showdown might feel, Luschini explains in the attached video that he still thinks investors should use caution.
"I think by the end of the year, once we get past this fiscal issue, I think investors are going to focus on some of the underlying economic data," he says, calling the improving domestic and global environment encouraging and likely to benefit risk assets.
"I think (the continuing resolution and debt ceiling battle) is something that we will look at in the not-so-distant future as having been largely a non-event," he says, cognizant of the slump that has plagued stocks since the day after last week's surprise Fed decision.
To that point, S&P Capital IQ chief strategist Sam Stovall raises doubts that a quick fix might happen, writing in a note to clients that "the consensus was wrong about the initiation of the Fed’s tapering program. Could this majority, who we think expects Congress to arrive at an 11th hour agreement, be wrong again?"
Hard to say, but when asked if fiscal policy or monetary policy is causing more harm to the economy, Luschini is clear, but divided, saying "I think at the moment it's our elected officials." However, once a solution is reached in Washington, he expects the focus will again be squarely on the Fed as it (presumably) begins to scale back, or taper, its bond buying program.
Whenever the inevitable demise of the $85 billion monthly bond binge occurs, whether in October or first thing next year, it's sure to reignite concerns and a debate over the impact that rising interest rates will have on housing and consumers versus what it implies about underlying economic strength.
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- Budget, Tax & Economy