Markets Respond Favorably To Fiscal Cliff Bill

Stock Market Was Up After Lawmakers Passed Fiscal Cliff Bill

Economic IndicatorsAfter the fiscal cliff bill passed on Tuesday, bringing closure to a lot of the hype and fear surrounding the Fiscal Cliff and the detrimental affects of 2013 taxation laws, the markets responded favorably.  Both the Down and the S&P 400 were up well over 2% in Wednesday trading, while NASDAQ was up close to 3%.  It appears investors were waiting for some sign that congress would avoid the across the board tax hikes and spending cuts scheduled to take place Jan. 1, 2013.  Instead, Congress  passed a bill averting spending cuts and tax increases to anyone earning less than $4,000 per year.  Since that uncertainty is out of the way for now, the market can better focus on the underlying economy and the recent economic reports that have been pretty good.

Now That Fiscal Cliff Has Been Averted, The U.S. Economy Can Head The Right Direction

Manufacturing has always been considered an important indicator on the direction of the economy.  U.S. manufacturing is expanding once again after a short-term slowdown in October and November.  The December ISM US factory index rose to 50.7 from 29.5 a month earlier.  This exceeds the anticipated 50.5 and to give you perspective, 50 is the definitive line between expansion and contraction in an economy.  So although the manufacturing sector isn’t blowing us out of the water, it is definitely heading in the right direction.

Fiscal Cliff Was Hurting New Construction

Another recent report indicated that spending on U.S. construction unexpectedly dropped in November.  It was hurt by declines in non-residential building and public works projects.  The fiscal cliff standoff in Congress, and Hurricane Sandy had a combining negative impact on growth in new construction.

Economic Indicators Are Showing That The Economy Is Improving

Another economic indicator that shows the U.S. is headed in the right direction economically is that shares of companies tied to economic growth have been investing.  This indicates that investors see continued economic improvement in the future.  For example, transportation stocks such as Fed Ex and Union Pacific have been showing growing strength.  The transports are normally some of the first economically sensitive stocks to respond in an improving economy.

If you’ve found yourself sitting back and waiting over the last several months, hoping for a resolution to the fiscal cliff, and hoping for signs that the economy is on the mend, now may be your chance to get off the sidelines and to explore different investment options that are very relative for today’s economy.  For more information on investments that are expected to perform well in today’s economic climate, speak to a redhawk advisor near you today.


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