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UBS Economist Drew Matus on growing concerns over the potential fiscal cliff and how it could impact the economy and the markets.
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-- -- one thing you know you're going to be hearing a lot about using it as just scare tactic or a reality that's coming the fiscal cliff.
Is the market's buzz phrase of the moment it refers to some economic headwinds meaning hikes in taxes that are already built in.
And of course certain spending cuts like defense.
This faces the United States at the beginning of 2013 in January 1 point two trillion dollars an automatic spending cuts are set to begin.
Plus a series of tax cuts are scheduled to end and along with that extended jobless benefits are set to expire altogether.
They call -- the fiscal cliff but.
How worried should -- really be about all of this impacting your money and if you're too focused on the map.
Are you missing true opportunity to invest wisely.
UBS economist -- -- says the -- is worried as you should've been about walk quite true today.
And that of course -- would be not -- alters joining us that a first on Fox Business interview from UBS in Stamford Connecticut I have to laugh because.
I covered white UK extensively had -- curtain went up to add your daddy's house just to get a SoundBite because Ed was one of those economists who was very concerned about it and -- of course.
Not -- happened it was not a big deal why do you say that the fiscal cliff is an equal comparison.
But I think what you have to -- If President Obama gets reelected he doesn't wanna reception in the first half -- next year.
And if the Republicans.
Sweep and then Romney wins and made it take the senate.
They don't want a recession the first half -- -- -- either way it's just a matter nothing can really get done before the election because no wants to give anyone else credit for having gotten it done.
But once you get past election things can move forward.
Once they can move forward.
Then you can solve the problem.
-- that the -- a lot of our competitors.
The competitors of UBS is that.
As they're trying to say well there's a 30% chance that this happens there's 20% chance that this happens there's a 40% chance -- this happens.
They're taking all these averages and and saying oh there's a drag on growth from that.
But that's not the way it's gonna work it either -- -- it doesn't it's called a cliff not a -- well.
You're you're right it's so many ways and we -- a lot of traders that the New York Stock Exchange saying that they were going to get to stay tuned and watch this interview because.
They're truly concerned as any great American should be about.
Spending cuts to things like defense or what have you but they're not as you say taking into account the fact that.
Most likely what ever -- as victorious they will move it's not in anybody's best interest to allow this to happen.
Now I mean look if this hits were in a recession next year.
Right so if someone comes due -- says the fiscal -- is gonna hit and I cover recession their forecast.
The other can't do basic math book or that or they're not paying attention -- -- If you're like -- senior source like -- hit but we still slow growth environment that end up with the F some mediocre lot of growth in the first half of next year probably nothing.
Too much better what we've seen this year may be touch better.
And then the second half of the year you could actually say well maybe there's a little more cause for optimism.
That's that's one or the other you can you can't have both an economist who try to straddle both are gonna.
Hurt themselves -- well I'm -- anybody who listens to them is going to hurt his or her opportunity to make some money by staying away from the markets is that what I'm hearing you say and if so.
Should people be in equities at this point or at least partially in equities because we are at let's not ignore it.
Record profits and we've -- this fiscal -- was coming for awhile nonetheless.
The NASDAQ up 20%.
Dow Jones industrials up 19% year for year same with the S&P 500 up 17%.
We had a really nice market -- -- just astounding isn't it.
It is I mean -- just to be a little careful because some of the things.
For example dividend taxation capital gains taxation.
If you wait until after the year and you know is the fiscal -- to get resolved but as to why not be fair rules for that right so -- you know there there are.
In there's some thinking that has to take place but I think in terms of the underlying economic fundamentals when you look at it we're seeing improvements -- bank lending.
They're not wide they're not a huge amounts what they aren't -- pretty persistent and and so that's encouraging future job growth.
We're also seeing -- declining level claims each and every week.
There -- those things don't tend to have -- the economy's falling off a cliff.
If -- fight -- best but what are the best opportunities for investors right now if you believe that the fiscal cliff will be resolved before that.
Clock strikes the proverbial midnight.
Well I mean I think certainly having me here that you're going off my belly America's -- -- -- economists -- I would say that unity you wanna you wanna capture the growth and and stay away from from the non growth assets so right now I think that would favor more equities rather than bonds.
Sure what that less defensive.
It's great to hear your voice of common reasoning -- thank you so much for joining us thank you.
UBS.
