Weekly Commentary - The latest outlook of U.S. market after the “fiscal cliff”
U.S. Congress passed the bill to prevent the world's largest economy fell into "fiscal cliff" last week. Investment markets were inspired by the news and booked strong rallies last week. U.S. S&P500 Index rebounded by 4.57 percent last week.
The deal raises tax rates on upper-level household incomes, extends unemployment benefits, and delays across-the-board spending cuts for two months, but it also lets a 2 percent payroll-tax cut lapse. For the individual incomes of more than $400,000 and on couples’ incomes over $450,000, tax rates will rise to 39.6 percent from 35 percent currently.
However, investors should aware that the deal does nothing to address the U.S. borrowing limit, instead it only delays automatic spending cuts for two months. U.S. President Obama said he is not going to negotiate to raise the debt ceiling. The upcoming debt limit negotiation will be another battle field in U.S. Given the experience in the negotiation of “fiscal cliff”, both parties are unlikely to reach the compromise in short term. U.S. market is likely to under pressure and it is possible for investors to see another correction in U.S. market as the deadline in March 1 approaches.
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