Will The Tea Party Congress Bring Recovery?

[andymillette]

If the Republicans make good on their campaign promises, we will see cuts in government spending and an end to fiscal stimulus. Given that short-term stock market performance is very much dependent on such government assistance, the current rally is hard to fathom.

http://www.themarkettraders.com/content/will-tea-party-congress-bring-recovery

Andy

 

[TCE]

Absolutely. If spending is decreased, the markets will go down. The Fed has already done QE1 and QE2, so they can't provide much help to calm fears. The markets shouldn't worry, though, Congress is planning on cutting MAYBE $100 billion from the budget, which is nothing, and it likely won't be that much. In the short-term, it looks like the markets will remain relatively stable, but will probably experience a slight dip. If the Republicans actually cut over $100 billion, then yes, the markets are going to respond poorly. The question is: Which would you rather? Short-term market gains or long-term stability? Everyone knows the spending spree can't last forever, and if the U.S. has its debt downgraded, then some panic will probably ensue.