Consumer Confidence Holds While Market Swoons

Consumer confidence, possibly helped by the election outcome, appears to be rising in spite of the negative news about the fiscal cliff.  It is as high as it has been since the 2008 recession.  Partially, it’s a reflection of about three-quarters of the public not understanding the effects of what could happen January 1, 2013 (Pew 2012).

The market, on the other hand, is off 1000 points since early October.  After hitting 13610 in October, it closed Friday at 12588, only up three percent for the year.

Conditions affecting the markets:

• Jan. 1, 2013 tax hikes and spending cuts of $600 billion, possible recession in 2013
• Doubling the market fueled by $4.7 trillion in federal borrowing and Fed intervention to lower interest rates and add money to market – not sustainable
• Long-term capital gains taxes could rise from 15% to 23.8%; dividends up from 15% to 43.4% (depending on income level)