Analysts Perceive Europe to be Better than US because of Fiscal Cliff

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.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza