In my July Market Analysis I first mentioned about the fiscal cliff US will be facing end of the year and sounding out a statement "there could be another event few months later that cause panic selling, correction to the stock market and only bottoming out in December 2012." which was referring to the fiscal cliff issue and since then the subsequent market analysis which I wrote all mentioning and stressing on this fiscal cliff. US markets fell at least 2.3% yesterday night all due to concern of the threat of this fiscal cliff. Whether this is a one-off drop or not, it signaled "DO NOT OVERLOOK THE FISCAL CLIFF" issue.
This fiscal cliff is not something to be taken lightly. US economy as we knew off is basically stalling at the moment and at the same time US Government is having a high debt level. That was the reason they needed to raise the debt ceiling last August and came out with the Deficit Reduction Panel (consist of both Republicans and Democrates) to propose a plan to cut the Government debt. Failure to to do will trigger the auto mechanism to cut expenses across the board comes January 2013. Back to the very basic fundamental of economy. If the country economy is slowed or stalled, Government will need to spend to stimulate growth (namely in infrastructure) and with US Government having spending restriction due to the fiscal cliff, how can US Government stimulate growth. This can easily bring US back to recession in no time.
Whether can the politicians be able to come out a plan before January 2013, nobody know as we have seen US politicians playing gridlock many times (putting party interest ahead of nation interest). It is now too early to tell whether the fiscal cliff can be avoided or not. Just have to watch the event as times tick towards the January 2013 deadline. While the event being played out within this next 1.5 months, be prepared for market volatility. After Obama won the election, nothing much has changed in the political scene in US. The Lower House still dominated by Republicans while the Senate level is controlled by the Democrates.
Some might have missed buying opportunity during the last October and this June bottom, this coming fiscal cliff issue should present with another market bottom. Do keep option opens that from now till mid December, a market bottom could appear and that probably is the last buying opportunity. Many have the habit of using STI level to decide buy or not. Unfortunately, it will not work, DO NOT LOOK AT STI to decide when to buy but instead look at the individual stocks. Example S-Reits, a reference could be the dividend yield to decide on entry price
