Photo: Bloomberg TV
From JPMorgan’s Tom Lee, the one paragraph summary of the fiscal cliff and the market:We see ~15% chance of falling fully off the cliff. We think the odds don’t change much regardless of who wins the White House in Nov. Under this adverse scenario, the S&P500 could have downside to 1100. We think the most probable outcome is Washington “punts” the fiscal outcome by 6 months, by delaying both (i) the expiration of tax rates and measures and (ii) sequestration. In our view the probability is higher with a Romney vs Obama victory (70% vs 65%). We see upside well beyond our 1430 target (towards 1500-1550) in the event of a Romney win and considerably less downside to equities as well. Our base case for 1430 YE in the S&P 500 is based on an Obama victory.