Poll: Investors Expect Stocks to Drop Without Fiscal Cliff Deal

Friday, 07 Dec 2012 07:50 AM

By Dan Weil

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Most institutional Investors believe the stock market will fall if Congress and the White House are unable to reach an agreement on the fiscal cliff by Dec. 31, according to a poll conducted by Potomac Research Group of its institutional-investor clients.

Of the 62 hedge fund, pension fund and money-market managers surveyed, 11 percent predicted the Dow Jones Industrial Average would drop at least 20 percent, while 48 percent believe it would fall at least 10 percent, The Hill reported.

A majority (56 percent) of the respondents expect a successful accord, compared with 44 percent who don’t.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

If we do jump off the fiscal cliff, the tax increase that most worries the investors is the one for dividend taxes, which would push the top rate to 39.6 percent from 15 percent currently. After that, it’s the capital gains tax, which would rise to 20 percent from 15 percent now.

Potomac’s clients aren’t the only ones worried about the impact of a cliff dive on stocks.

The cliff “is the biggest risk and largest challenge for 2013,” David Blitzer of S&P writes in a report obtained by The Wall Street Journal.

“If the U.S. plunges off the cliff, a recession may start in the first quarter, meaning jobless rises and declines in about everything else — [gross domestic product], profits, incomes and stock prices for a few.”

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

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