A cliff deal might not necessarily inaugurate a rally.
If it is interpreted mostly as increasing unsustainable debt, it might mean fear of having to pay the piper.
Personally, it that is the deal we get, and the most likely deal at that, I think it would take another few years to harm the economy enough to cause a tailspin in earnings. Yes we have seen irrational tailspins before.
So we will probably see a big temporary flood of buying when a deal is announced, but after that I would not be too sure that it will keep, like the day after Uncle Ben's QE3 on sept 5. Four day rally followed by a two week selloff.
So the question, as always, is there more hope or fear following The Deal.
There is an upside[for congress on both sides] to letting the sequester happen with its higher tax rates. In the subsequent congressional period, everybody can claim the re-election cudos of having voted for a tax cut.
Any positive news will start a rally. If Obama and Boehner passed in the hall will a reported smile,SHOW TIME !!! Reality would bring any early exhagurbation into check. But this market wants to move uppppppp !!!
We are going over the cliff. It allows the republicans the silly ability to say they are cutting taxes in 2013.So forget about the cliff and focus on the debt ceiling. The US may actually default on its debt which will really freak out the market. Get the popcorn out and get ready to watch the show.
Yep, cliff here we come. There will be no substantial bargain until the debt ceiling debate ... several Repubs have already said that ... they feel that will give them more leverage. In the worse case, it could mean thousands of points off the DOW ... it was 3,000 last time.
Also, everyone is amazed that Boehner couldn't count the votes correctly for his Plan B. Hmmmm ... Speaker can't count .... hmmmmm. Maybe this is one of those cases where that is the result he wanted [i.e. he didn't have to count anything, just pull the vote]. Why? It suggests that the House won't vote for any kind of tax rate increase ... not even when it starts at a $million a year. Political posturing.
I have raised my cash balance, and is now over $1 Large. The tricky part will be to know when to buy ... I just know it's not next week.