Stock markets down on fiscal cliff uncertainty; Fiscal cliff similar to eurozone debt crisis

16 November 2012: Stock markets down on fiscal cliff uncertainty; Fiscal cliff similar to eurozone debt crisis

James Hughes, Chief Market Analyst at Alpari, one of the world’s leading forex brokers, said: “Stock markets are expected to continue their decline today as concerns over the fiscal cliff grow.

European stock indices are nearing multi-month lows today, with the FTSE hovering above a key support level around 5650. The fiscal cliff continues to be the main reason behind the rapidly declining global sentiment and has taken over the eurozone as the greatest threat to the fragile global recovery.

What we're seeing at the moment is very similar to what we've seen in the eurozone in the past few years. As no one knows exactly what the cost of going over the cliff will be, it is very difficult to put a contingency plan in place. 

From a business perspective that basically means that things stand still for a couple of months, while from an investor perspective it makes it very difficult to put your money in stocks as it's difficult to ascertain the value of a company when we are unsure what conditions will be like in six months’ time. As a result, I expect stock indices to remain in free fall until we see a decision in the US.

While this does not only impact the US, the stock markets there have been the hardest hit at the moment, with the S&P, Dow and Nasdaq all trading near four month lows. 

The price of oil is continuing to rise in recent days as the conflict in Israel continues. Any troubles in the Middle East tend to push oil prices higher and as this is only showing signs of escalating, the increases here are likely to continue in the short term at least. We also have the continuing issues in Syria and the sanctions on Iran pushing prices higher.” 

Note: The content of this text comprises personal opinions and ideas and should not be taken or misunderstood as investment advice.