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11:24 AM
Justin Grant
Justin Grant
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Goldman Tells Clients to Bail Out of Equities As Fiscal Cliff Looms

The bank's chief U.S. equity strategist says stocks are due to plunge with Congress unlikely to address the fiscal cliff before Election Day.

Goldman Sachs isn't expecting Congress to address the so-called fiscal cliff before Election Day, and possibly even before year's end, a scenario their chief U.S. equity strategist David Kostin predicts will send stocks plunging, CNBC reports.

Citing Kostin's research note, CNBC said he expects the S&P 500 index to plunge 12 percent since lawmakers are unlikely to address the expiration of payroll, capital gains and dividend tax cuts that are scheduled for the end of the year. Automatic spending cuts will also take effect if the Bush tax cuts are allowed to expire, terms that came about following last year's ugly debt ceiling fight.

The Congressional Budget Office predicted this week that the nation's economy will slide into a deep recession if lawmakers don't act in time.

So with this scenario looming like a dark cloud, CNBC said Kostin is telling Goldman's clients to get out of equities while they can. However no mention's made of where investors should park their money after pulling it out of equities.

From CNBC:

"Political realities and last year's precedent suggest the potential that Congress fails to reach agreement in addressing the fiscal cliff is greater than what most investors seem to believe based on our client conversations," said Kostin.

"Last year, the deadline for Congress to raise the federal debt ceiling was known months in advance," states the report. "Nevertheless, Congress was unable to reach an agreement that satisfied all factions. Investors were stunned and the S&P 500 plunged 11 percent in 10 trading days."

As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced Trading in 2010, Grant's news analysis has touched on everything from the latest ... View Full Bio
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