Just a Change of Venue? (Fears About U.S. Deficit/Debt Ceiling Replacing Fiscal Cliff Worries)

With the U.S. fiscal cliff negotiations going down to the wire, it is not surprising that fears related to the fiscal cliff topped the list of investor threats to the stock market for the eleventh week in a row in the VIX and More weekly fear poll. Fears associated with governments and politicians as well as excessive central bank intervention polled in second and third place, respectively.

What I found particularly interesting is the sudden rise in fears related to the U.S. deficit and debt ceiling, as investors appear to be concluding that the current fiscal cliff negotiations are now just one more skirmish in the ongoing war between Democrats and Republicans regarding how to address the U.S. budget deficit. With Treasury Secretary Timothy Geithner saying that the U.S. will hit its debt ceiling today and have to resort to extraordinary measures to keep under the legal limit, the stage is set for the next pitched battle when these extraordinary measures can no longer do their trick, in about two months.

So what problems will a fiscal cliff deal resolve? Part of the answer to this question depends upon whether the pending (we hope) deal is merely a stopgap measure or addresses some of the more politically thorny underlying issues related to the budget deficit in a comprehensive way. Of course the trick is structuring the deal in such a way that it does so in a manner which limits any negative impact on the economy.

Stay tuned. A fiscal cliff deal may only signal a change of venue and redirect investor fears to the next battleground.

Once again, thanks to all who participated in this weekly poll.

Related posts:

• Fiscal Cliff Widens Lead as #1 Concern
• Fiscal Cliff Continues to Top Fear Poll
• Fear Poll Respondents Focus on Fiscal Cliff, Dismissive of European Financial Crisis
• Fear of Governments and Politicians Climb Rapidly as Euro Zone Worries Fade
• Fiscal Cliff Concerns Top Fear Poll, But Central Banks and Politicians Seen as Key Systemic Threats
• Fiscal Cliff and European Sovereign Debt Concerns Recede, Earnings Worries Linger
• Calm Down and Exploit Others’ Anxieties (Barron’s)
• Fear Poll: Fiscal Cliff Fears Spike , Concerns About Excessive Central Bank Interventions Rise
• Fiscal Cliff Worries Grow as Election Nears
• U.S Fiscal Cliff Fears Top VIX Fear Poll Again
• U.S. Fiscal Cliff Concerns Top Results in Inaugural VIX and More Fear Poll
• Chart of the Week: Visualizing the Flash Crash
• Some Thoughts on the Seis de Mayo Crash (my moniker did not stick…)
• A Conceptual Framework for Volatility Events
• Forces Acting on the VIX
• Thinking About Volatility (First in a Series)

Disclosure(s): none