Edit ModuleShow Tags

Fiscal Cliff 101


The critical need to raise the debt ceiling will be the "catalyst for short-term measures to avoid falling off the fiscal cliff,” according to Morgan Stanley’s Government Affairs Office in Washington.

Morgan Stanley believes one likely outcome will be adoption by the lame-duck Congress of a six-month extension of the status quo (“kick the can”), to give the new Congress time to see if it can reach a “grand bargain” compromise later in 2013.

Another possibility, in the view of Morgan Stanley Wealth Management’s Global Investment Committee, is a one-year extension of existing tax rates for most taxpayers, with some compromises on the upper-income brackets.

The Global Investment Committee expects that action to mitigate the “fiscal cliff” will reduce the impact on the economy – from 5 percent of GDP (without action) to 1-2 percent.

Post-election, Morgan Stanley’s Global Investment Committee made the following strategic asset allocation recommendations:

• Increased exposure to risk assets by adding US and Europe ex-UK equities, investment grade credit and commodities. 1
• Lowered weightings in cash, short duration and high yield bonds.1

According to Morgan Stanley’s Nov. 12 weekly market commentary, “The catalyst for this change is our view that the impending U.S. fiscal cliff - fiscal drag of 5 percent of GDP that threatens another U.S. recession - will be mitigated and delayed. Progress on fiscal policy reduces uncertainty and is thus positive for risk assets.”

The most important advice I can offer investors during this time is to focus on your long-term financial plan rather than short-term market dips. Be realistic, but not fatalistic, about current market conditions and returns. Investors prepared for occasional declines will be less likely to fall prey to panic selling. And finally, don’t try to time the market, and keep your portfolio well-diversified to help cushion volatility.

Edit Module
Todd Hauer

Todd Hauer is a Financial Advisor with the Global Wealth Management Division of Morgan Stanley Smith Barney in the Denver Tech Center. He can be reached at 720-488-2406 or toll free at 1-800-347-5099, or you can email him at Todd.Hauer@morganstanleysmithbarney.com.

Get more content like this: Subscribe to the magazine | Sign up for our Free e-newsletter

Edit ModuleShow Tags

Archive »Related Articles

Using Artificial Intelligence to Progress and Evolve Global Languages

In this context, language itself becomes a cultural taxonomy, and with more than 7,000 languages left to preserve, it has the potential for becoming the largest museum in the world with associated universities, hotels, culture-inspired retail centers and more.

Aurora's Transit-Oriented Public Art Serves as Attraction and Economic Engine

The collaborative efforts were acknowledged by the Colorado Business Committee for the Arts in 2018, with multiple transit stop projects included in the honor.

Colorado, Cryptocurrency and Coinsource

The business community and residents will surely move the proverbial needle in Colorado: By advocating for grassroots change, local communities can showcase crypto’s unique value proposition and demand that mainstream regulators and corporations take notice.
Edit ModuleShow Tags
Edit ModuleEdit ModuleShow Tags
Edit ModuleShow Tags Edit ModuleShow Tags
Edit ModuleShow Tags Edit ModuleShow Tags
Edit ModuleShow Tags Edit ModuleShow Tags