The budget deal that kept the government from shutting down on April 9 reduced spending by next to nothing in U.S. budget terms. And that’s great news for investors in U.S. stocks.
How so? A quick look across the pond is all it takes to answer that one. The UK is in aggressive budget balancing mode and all the cutting of its government spending is sending its economy in reverse.
And a shrinking economy is an awfully hard place for companies to beat earnings expectations. If the U.S. had passed meaningful budget cuts, they would have the same economic braking effect as they did in the UK. And thanks to bitter rifts within the Republican party as 2012 approaches, the Democratic leadership should have little trouble exploiting those divisions to keep the Republicans from derailing the economic recovery. Read