Sunday, November 27, 2011

As expected, U.S. Super Committee fails - markets take a hit

As the U.S. congressional “super committee” failed in its objective to identify $1.4 trillion in U.S. budget cuts by its November 23 deadline, politicians pointed fingers at each other and Standard & Poor's and Moody's Investors Service said they would not downgrade the credit rating of the U.S. as long as the planned automatic spending cuts did not change.

MY TAKE: It is broadly understood that addressing the U.S government’s debt crisis requires increases in revenue (more taxes) and decreases in government spending (affecting defense and entitlement budgets). Repeated failures by the U.S. Congress to deal with these issues highlight shortcomings in both Congressional processes and many legislative participants. Regarding the impact on investors, market uncertainty continues to increase and this past week’s negative market action reflects the current investor mood. The global economy is traveling a path where the arrival of unexpected consequences can continue to deliver swift and negative moves. In the short term, positive holiday sales trends may provide market stability.

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