First the politics, now the fiscal cliff

These have been some remarkable weeks. Earnings, the last leg of the election campaign, hurricane Sandy’s storm surge and power outages, Barack Obama re-election, and a nor-eastern to boot.

And as divided as the voters were on the election, so are the analysts on what the Obama win will mean for the markets. The buzzword, for the coming weeks however, will continue to be the fiscal cliff.

The analyst and political comments range from warnings of total meltdown of the American economy to the assertion by Nobel Prize winning economist Paul Krugman’s that ‘no deal is better than a bad deal’. Despite what he admits himself, seem to be very serious consequences for the economy.

As both camps play the media game and position themselves for the coming negotiations, the markets will remain ill at ease even if everyone involved believes some type of compromise will have to be reached and sooner rather than later.

Fiscal Cliff? So what else is happening?

A small ray of hope at the horizon! The September International Trade Deficit numbers added a surprising $ 16 Billion net increase over Q3 real GDP, led by a large broad-based increase in exports. According to some analysts this seems to hint at a stabilization of the global market with an important effect on the US economic performance in that timeframe.

Stocks

US stocks sold off after it became clear that we had opted for ‘four more years’. Internationally, markets in Asia as well as Europe seemed to welcome a second term, although concerns about the US fiscal cliff also have their impact there.

Commodities

In agriculture the dry weather conditions and their effect on winter crop will continue to be the focus of attention in the last weeks of the year. The industrial metal and energy sectors have seen volatility and will probably continue to do so until the year end. On the other hand the weak economic growth and political uncertainty seem to favor an extension of QE at the next Fed meeting in December and a possible downgrade? in 2013. These factors in turn create very favorable conditions for precious metals and investors looking for diversity plays.

Bonds

In bonds it is all about politics. Even if House Speaker Boehner and President Obama ignore the political noise and ‘get it done’, it promises to be a long and bumpy ride. Both Moody’s and Fitch have warned about the possible negative consequences a delay in the resolution of the fiscal cliff dilemma could have on both the US and global economy.

Things to look out for:

Week ending November 18th
Monday: Veteran’s Day and closed Bond markets
Wednesday: October retail sales and Fed meeting minutes

Week ending November 23rd
Monday: look out for existing home sales and housing market data
Tuesday: housing starts
Wednesday: jobless claims, consumer sentiment, oil and natural gas
On Thanksgiving Bond and Equity markets will be closed
Friday: NYSE early close