The common wisdom at this time is that a Cliff deal is good for the economy and stock market because it averts a potential recession. However, the Market Gods like to trick as many people as possible. So it's could actually turn out that a deal results in falling stock prices.
Consider this. If we don't start trimming the debt, then at some point interest rates on Treasuries will likely go higher. That's because creditors may begin to doubt our ability to pay it all back if we don't show some fiscal restraint. And the higher rates go, the harder it becomes to pay down the debt...which becomes a vicious cycle.
Assuming there is a deal, then which of the following do believe will happen.
1) Stocks immediately go up and stay up.
2) Stocks immediately go up, then come down.
3) Stocks go down at first, then head back up.
4) Stocks go down at first and stay down.
And whichever you pick, please explain why in the comments section below.
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