For those of you who were busy watching the Bachelorette last night (as I was), you were interrupted by the two speeches that were given by President Obama and House Speaker John Boehner (the top Republican in Congress). Both of them presented their proposals on how to handle the debt issue that Washington has been argueing over for the past couple of months, and also took time to refute the other political party's plans. The divided and dysfunctional government that we are currently seeing seems to be more concerned with talking points, rhetoric and getting re-elected, as opposed to thoughtful policy and addressing the issues our country faces.
Once the debt ceiling issue passes, investors will still have to deal with the state and municipal revenue shortfalls that we are seeing across the country. Simply put, we will be seeing our taxes raised and entitlement programs cut as we continue to "spend more than we make". Both of these will hamper economic growth and further hurt the middle class who is already pressured by the increase in inflation (the cost of goods such as milk, eggs, and gas).
Another headwind the investor will have to face is the lack of confidence in business expansion and hiring. Over the past week, Research in Motion (who makes Blackberry's), Goldman Sachs, Borders, Cisco, and defense contractor Lockhead Martin announced job cuts in excess of 26,000. And just this morning, it was announced that the U.S. Postal Service plans to close 3,600 units...another example of workplace headwind.
Inevitably, Washington will reach a compromise, but the problems we face run deeper than that. As I've previously mentioned, we are still struggling under the weight of anemic economic growth, a tepid employment outlook, the possibility of rising taxes, an increase in inflation, and a housing market that continues to show few signs of a rebound.
All this negativity being said, there will still be opportunities for money to be made in the stock market. Some examples are by buying stocks that have the potential to be acquired/bought by other companies (such as the news that came out recently that several companies are looking at buying Etrade Financial), by investing in corporate bonds, and by buying high yielding dividend stocks that give investors income growth and protection during uncertain times.
