This Fiscal Cliff stuff is even more annoying now than two weeks ago. Two sides playing a game of who jumps first and neither side is willing to even make a step. Gotta love our politicians.

The market is telling you exactly what is going to happen:
Nothing. Since the government has been immersed in the Fiscal Cliff debate we haven’t seen the market vote in either direction. We think investors are confused as to what either scenario will look like going forward and have just stayed away.

Sectors that should be greatly affected by reduced government spending are barely reacting to that potential. The defense sector, for example, is up 12% this year. This whole situation we feel is overblown and whatever happens it will only barely nudge the needle next year. Counter to what all the talking heads have said, reduced government spending is not a chilling thought. The government’s money is rarely well spent. Increased taxes, which we are sure, will happen, will impact growth but only slightly. The positive signs in the economy will be a much bigger story next year.

We look to some freak sell off as a buying opportunity and realize that the potential for that actually happening is getting slimmer and slimmer.

Other than Quadruple Witching Friday there really isn’t anything significant coming up this week. Traditionally the Quadruple Witching scenario at the end of the year is one of the busiest days of the year. It’s also potentially one of the most volatile. We see this year no different. Portfolio switching, tax selling and unwinding of hedged positions should put some pressure on the market but the undercurrent for the last four months has been one of underlying strength. This strength is not to be forgotten about and will put a solid floor on any potential sell off.

We will watch Housing Starts, Durable Goods and of course, Jobless claims. No surprises expected.