If You're Still Not Convinced That Government Spending Cuts Will Hammer The Stock Market...

Tea Party Lady

The old-school supply-siders like Larry Kudlow don’t want to hear that austerity could have a negative effect (at least in the short term) on the economy and the stock market, as we’ve argued before.

PragCap points to the clear fact that Cisco’s earnings were hammered thanks to government spending cuts, both at the local and state level in the US, and in austerity-happy Europe.

A Stiefel Nicolaus report lays out the numbers:

    **Cisco’sKeyTakeaways. (1) Cisco reporting notable weaknessinthe Public/Gov’t vertical, in which the company cited weakness particularly in the U.S. with a rapid change (deceleration) in State/Local Gov’t spending dynamics. Total public vertical accounted for ~22% of Cisco’s total product orders; total global orders up only 6% yr/yr vs. +23% yr/yr in the prior quarter.  Within this, Cisco did report that it saw mid-teens/stable growth in the U.S. Federal vertical.

You can argue that over the medium-or-long term, spending cuts are going to be good for the economy.

If you can’t get over the idea that there will be short-term pain, you need to recalibrate.

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