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Wall Street cheers "cliff" deal, but only for now

Published on NewsOK Modified: January 6, 2013 at 12:38 pm •  Published: January 6, 2013

Investors should take advantage of any volatility in the market created by the political wrangling to seek out stocks that have a history of growing their dividends, says Sandven. He estimates that half of the stocks in the S&P 500 have a dividend yield that is higher than the current 10-year U.S. Treasury note. The 10-year Treasury note was at 1.90 percent Friday.

He also recommends that investors buy the stocks of companies that have exposure to emerging markets that have a growing middle class and don't have the same debt issues as the U.S.

Joseph Tanious, a global markets strategist at J.P. Morgan Funds, says investors would be wise to remain calm when the negotiations in Washington around the debt ceiling start to heat up this spring.

The stock market dropped sharply in the weeks after the election Nov. 6 as investors worried that a divided government wouldn't get a deal done in time to meet a budget deadline by the end of the year, but it has rebounded since then. The S&P 500 is now 2 percent higher than it was on election day, even after falling by as much as 5 percent in the two weeks following the vote. On Friday it closed at 1,466, the highest since December 2007.

"When push came to shove, Congress did come together to reach an agreement," says Tanious. "Many people were saying you should be out of the market ... (that) markets are going to capitulate, and that didn't happen."

Stocks have rallied over the last three years as investors remain optimistic that the economy will maintain a slow, but steady, recovery from recession, as the housing market improves and as the outlook for jobs gets better.

And while investors also see the wisdom in addressing the nation's long-term debt problems, they point out that businesses and consumers have been aggressively paying down their own debts in the aftermath of the 2008 financial crisis. That leaves more flexibility for people and companies to shop, invest, and spend money, helping to lift the economy — and the stock market — even if Washington's political dysfunction worsens.