Another week with the key parties in the fiscal cliff negotiations moving as fast as snails in a race towards a precipice where the outcome is unknown. It’s nearly like a storyline for an episode of the Twilight Zone – but it’s real!
In case you don’t know what I think about this fiscal cliff and what it could do to stocks, let me give you the worst case, believable scenario.
The best case is simple — a deal is struck this week before Christmas, US politicians head to their families for the holidays and the market continue a long Santa Claus rally. This rally rolls into January. But what about the worst-case scenario? This starts with no deal by December 31 and the stock market consequentially selling-off substantially. I would not be surprised by a 5% slump, but it could get to 10%!