Deal, but So What?
Reduced uncertainty has yet to lead to economic growth.
The bull case is that it removes uncertainty and lets the market rip higher.
First it is tricky in terms of timing, a huge move on a half-closed Monday on last day of year, then our first day of 2013. An extra level of uncertainty.
Let's look at what has really happened.
Sequestration pushed off a couple months for the new Congress. It doesn't seem like we have eliminated uncertainty, just pushed it off
The debt ceiling is next and it is bigger with what seems to be an almost dysfunctional government. I don't see this helping to reduce uncertainty.
I will ignore that "reduced uncertainty" has been a constant theme that (at least so far) has never amounted to real economic growth.
Most people will get smaller paychecks next year. Reduced uncertainty would go better with higher take-home pay. Why is everyone cheering what is a tax hike? The spin is one thing; the reality is another.
Then we get economic data. Last year, we had some monster data and some great weather in Q1. Hard to say how much of that was seasonal adjustments, but we may see some negative impact if last year's Q1 numbers were overstated.
Having gotten bullish finally last week, I don't see it here. Small pop (maybe), then drift lower.
Credit can do better than equity, foreign markets better than domestic, and CDS better than cash.
We will see, but I find the hype and spin just doesn't match the reality of what has actually occurred.
Editor's Note: For more from Peter Tchir, check out TF Market Advisors.
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