Getting Closer: Fiscal Cliff Number One Concern for Investors
Wonkblog's Suzy Khimm reports on two new surveys showing that investor concern over the fiscal cliff has well overtaken their concern about Europe's woes at this point. A Bank of America survey showed 42 percent of investors said the cliff was their biggest concern compared to 27 percent who said the European debt crisis.
This switch is remarkable, since concerns about a possible break-up of the Euro or other fallout from the Eurozone have been in the forefront for a few years. Macro Risk Advisors found similar results. Here's what they said about their survey:
The results of our most recent survey of market uncertainty factors show the risk most cited by U.S. investors as relevant to market conditions is a domestic one — the fiscal cliff and upcoming elections. This is a shift from almost every other instance over the past three years in which we have asked this question, when the answer was overwhelmingly Europe. European risks ranked behind two others as well — the potential for a debt crisis or popped housing bubble in China, and the inflation/deflation implications of unconventional central bank policy and fiat currencies.
Furthermore, General Electric is reportably refinancing bonds early and gathering more cash in anticipation of market volatility at the end of the year if there is not a quick resolution. This news comes on the heels of warnings from credit agencies who have threatened a further downgrade of the U.S. credit rating. GE is not the first company to position itself for the fiscal cliff. Many defense contractors have been slowing their hiring through the summer, and we can expect similar reactions the closer we get to the cliff without a solution.
Investor concerns are not a sole motivation to act, but it should be an early warning sign that an eleventh hour solution will not come without a cost. We need a long-term solution to deal with debt before the fiscal cliff takes too much of a toll on the economy.