Investors, Beware Fiscal Cliff Ahead

Until and unless our political leaders deal with the scheduled tax increases and spending cuts on the horizon, expect big swings -- most of them down -- in the stock market.

Fasten your seat belts. We're rolling full speed ahead toward the fiscal cliff. If you expect investment markets to be calm until the January 1 deadline, please remove your rose-colored glasses. It's going to be a roller coaster -- with the ride mostly down -- until a deal is cut. The last couple of days make it plain that the stock market will not tolerate a mindless ad nauseam repeat of congressional talking points and dogmatic posturing without a solution.

The market is already partying like it's the summer of 2011. In case you've forgotten that little shop of horrors, that was when President Obama and House Republicans deadlocked over raising the debt ceiling and cutting spending. They finally reached agreement, but they got so close to breaching the debt ceiling that Standard & Poor's downgraded the credit rating of U.S. government bonds, the first time any ratings agency ever did such a thing. (Many people didn't know the U.S. government even had a rating.) From July 22 through October 3 last year, Standard & Poor's 500-stock index plunged 17.8% (including reinvested dividends). The losses could have been way worse.

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Steven Goldberg
Contributing Columnist,
Steve has been writing for Kiplinger's for more than 25 years. As an associate editor and then senior associate editor, he covered mutual funds for Kiplinger's Personal Finance magazine from 1994-2006. He also authored a book, But Which Mutual Funds? In 2006 he joined with Jerry Tweddell, one of his best sources on investing, to form Tweddell Goldberg Investment Management to manage money for individual investors. Steve continues to write a regular column for and enjoys hearing investing questions from readers. You can contact Steve at 301.650.6567 or