The first round of talks aimed at avoiding the fiscal cliff caused a temporary rise in equities on Friday, signalling Wall Street’s recent declines could be a buying opportunity.
Though shares ended moderately higher on Friday, it was not enough to offset losses for the week. The S&P was down 1.5 per cent, while both the Dow and the Nasdaq fell 1.8 per cent.
The S&P 500 is down more than five per cent in the seven sessions that followed President Barack Obama’s re-election. Uncertainty arose as attention turned to Washington’s task of dealing with mandated tax hikes and spending cuts that could take the US economy back into recession.
Some see the move as an overreaction to hyperbolic headlines about policy gridlock in Washington, believing stocks may start to rebound ahead of the Thanksgiving holiday on Thursday.
Not long ago the S&P was on target for its second-best year in the last 10, riding a 17 per cent advance in 2012. That’s been halved to about eight per cent.
Investors have been selling the year’s winners. Apple is down 25 per cent from its peak. General Electric is down 14 per cent; Google has lost 16 percent. Overall, the stocks that make up the top 10 per cent of performers in the month prior to Election Day have been the worst performers since, according to Bespoke Investment Group of Harrison, New York.