Markets were up again today on hopes that a fiscal cliff deal can be reached between Republicans and Democrats in Congress. While many pundits have been predicting a huge bounce for stocks if a deal is reached, we should preach caution to look before you leap here.
Any such deal is going to make neither side happy. The proposed austerity measures could impact real estate markets if things like the home mortgage deduction are limited. Judging by the track record of this socialism regime we currently live under in the United States, one could only guess that such “loopholes” will be closed on small business people who are trying to escape their class. If small landlords get crushed under the weight of such draconian measures, what could that do to stocks like Home Depot, and Lowes? Could real estate investment trusts take a major dive in the markets? Could the price of real estate decline once again, after only recently starting to show signs of life?
Our prediction is that we will get a small bounce leading up to a deal, but then markets will “sell on the news”, dumping stocks once they realize what is actually in such a deal. Tax increases on the wealthy, and loopholes closed on small business people are surely not the answer for an economy that is barely limping along. Sadly, this seems to be what the American people have voted for — and this may become a big case of “be careful what you wish for” when the effects are felt across the economy next year.