Local Financial Advisor Explains Market Hike; Says Decline Possible
The “fiscal cliff” compromise, even with all its controversy was enough to ignite the stock market on Wednesday to its biggest gain since December 2011.
“The burst is from… now businesses, employers and investors have an understanding of the impact financially that their investment decisions will make,” Financial Advisor, Derrick Newton said Wednesday.
Newton, who heads-up an Edward Jones branch in Carrollton says the stock market surge is likely due to the government compromise bringing an understanding to investors on how the taxes will affect their long-term investments.
“So, those who have capital gains, will understand now what the cost would be if they took them,” he said. “Those who have incomes over $400,000 understand now what the tax implications are… and the everyday-working-Americans now understand that not only are their payroll taxes going to go back up but as far as their income taxes… their tax brackets will not change.”
Newton warns that although the market is up now, this could easily reverse in the coming months.
“The bad news is that the debt ceiling wasn’t raised and by late February or early March they are going to have to do it,” he says. “Sequestration will also cause a short term concern. People are now optimistic because a tax piece was addressed and it was a permanent solution but the other two items are looming.”
Many investors were saying Wednesday that no deal at this time would have been worse than a bad deal.