One of the downsides of the current strategy from US President Barrack Obama and his team to put pressure on Republicans by painting worst case scenarios is that some of Wall Street analysts are buying into the rhetoric.
Growth in the U.S. is set to easily outpace the euro zone but the U.S. “fiscal cliff” is concerning strategists to such an extent that Europe, despite its on-going economic woes, looks like a better investment strategy.
“The ‘fiscal cliff’ in the U.S. is a worry,” Garry Evans,Global Head of Equity Strategy at HSBC told CNBC on Tuesday. “And that’s one of the reasons that I’m underweight the U.S. and I prefer Europe – it’s a bit of an unusual place to be.”
As negotiations continue between Democrats and Republicans over how to avert around $600 billion of spending cuts and tax increases, there are widespread fears that a solution on tax reform, deficit reduction and public spending may not be found before the new year.
Indeed, on Monday President Barack Obama told auto workers in Michigan that the U.S. economy would go into a “downward spiral” if a bipartisan deal was not reached.
Third party surveys have shown that there is no clear party who comes out ahead as the people see both parties as equally inefficient when it comes to the Fiscal Cliff.