It's a Tough Slog, but Productive

Focus: MARKETS

John Stephenson Image John Stephenson President and CEO, Stephenson & Company

Although the markets have given back a lot of gains since the US elections, much of the uncertainties of the markets are being resolved and economies are slowly clawing back observes John Stephenson in Strategic Investor.

The S&P 500 has tumbled 5% since Election Day, as worries about America’s approaching fiscal cliff have overrun investors. But markets are supposed to be not only rational, but also forward looking, so why now are the worries about fiscal drag surfacing?

After all, the market has known for months that this cliff was coming. Surely, all the worry over Obama's heavier regulatory hand in telecom, energy, and banking must have been priced into the market well before the first debate, when it looked certain that his lead over challenger Mitt Romney was all but insurmountable.

Beyond the Washington beltway, the reasons for the recent slump in equities are piling up. The darkening cloud over Europe, a region that accounts for 15% of the S&P500 profits, is a big contributor to the malaise. Not to mention the lackluster third-quarter earnings and the dismal guidance for the fourth quarter have all taken their toll on investors.

Throw in the huge slump in Apple (AAPL) shares as well as those at Dell (DELL), which tumbled to their lowest price in three years after four consecutive quarters of declining sales. The dismal results for technology companies have managed to dent the largest component of the benchmark index.

Meanwhile, President Obama met congressional leaders last Friday to start hammering out a deal to avert automatic spending cuts and tax hikes that are set to kick in at the start of next year.