Global markets started November in a positive direction, but ended down significantly after the election with worries over the fiscal cliff, future taxes and continued issues in Europe. Greece is once again in the foreground of investor worry as Euro-area finance ministers decide on whether to unlock more bailout funds for Greece. With the US presidential election behind us the markets are completely fixated on the issues surrounding the fiscal cliff. Unfortunately, lawmakers have to choose between, what appears to be the lesser of two evils. With the current levels of tax revenue and trajectory of debt, the deficit will continue to widen to unsustainable levels. On the other side of the coin, spending cuts and/or tax increases could very well put a dent in what little recovery we have had in the economy.

The US stock markets sagged lower the second week of the month, making it the fourth straight week the US markets dropped. International markets held up a little better than the US in the same four weeks, but all have been heading lower. The usual suspects like European insolvency, Chinese economic weakness, and the US fiscal issues have been the major factors in the trajectory of stocks.

The third week was shortened due to Thanksgiving, which resulted in low volume and little market news.

Finally, the last week of November saw global markets edge modestly higher. Over the course of the week, there were a number of positive economic surprises emanating from the US ranging from GDP to housing prices. In months past, such news would have driven markets higher than 0.5%, but the fiscal cliff worries tempered the enthusiasm for better economic data points.

The volatility in rhetoric and market movements is bound to accelerate as politicians take the US economy closer to the fiscal cliff. We see the odds of going over the fiscal cliff as 50/50. Given that the past 15 years has been marked with numerous politically and economically expedient decisions, should we expect any different this time? We remain prepared to take risk off the table, but think it is imprudent to try to guess the outcome of the political wrangling. The reality is going over the cliff will surely put a crimp on economic growth and could have a serious impact on the investing markets. Not going over the fiscal cliff (depending on the deal struck) could have negative implications on the market as well. A continuation on the current spending and revenue path will lead to very bad things down the road. At this point, we believe the market, investors and many Americans are conflicted by the cliff. Going over the cliff (in some ways) could be seen as the beginning of bringing some restraint in spending which would be a long-term economic good and short-term economic and investing market bad. We remain cautiously optimistic that in the short-term all will be done to avoid the cliff which will likely put some wind back in the sails of the investing markets.