Digging In to Fiscal Cliff Sentiment

 | Nov 14, 2012 | 10:00 AM EST  | Comments
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Stock prices are, of course, the ultimate barometer of what investors think about the outlook for equities. At the moment, these would indicate that investors are either unenthusiastic about another term for President Obama, or are pessimistic about the likelihood of solving the fiscal cliff. Looking beyond the market itself, however, we can look at some various polls, surveys and such for insight into what the market thinks.

The CFA Institute recently surveyed its members on whether the fiscal cliff will be averted. This isn't normally an optimistic bunch, but more than 70% think the cliff will be averted. This same group believes the economic news will dominate other factors, such as earnings, in driving stock-market returns in 2013.

Source: CFA Institute SmartBrief Reader Survey

Meanwhile, Bank of America/Merrill Lynch recently surveyed a number of hedge-fund managers to gauge their sentiment. This group is even more optimistic, with net long exposure at its highest level since June 2007! These folks buy into the improving economic indicators, and are optimistic China growth will surge. They are bearish on Europe and Japan, but don't believe they will blow up global growth. However -- this group does not believe the fiscal cliff is fully priced into the market yet.

Source: Bank of America/Merrill Lynch

On a separate note, here's one last commentary on the election -- in particular, the money spent to elect the president. This cycle, we spent nearly $6 billion to elect the leader of the free world for the next four years. At first glance that may seem shocking, but consider the following.

1. In a country of 311 million, we spent all of $19 per person.

2. In a country with a gross domestic product of $15 trillion, we spent 0.04% of our economic output on choosing our leadership.

3. In 2011, Coca Cola (KO) spent $17 billion on selling, general and administrative expenses. It spent nearly 3x the U.S. electoral budget simply to remind people to drink fizzy sugar water.

4) Procter & Gamble (PG) spent $26 billion on SG&A in 2011. It spent 4x our electoral budget to remind people to buy diapers for their babies and soap for the shower.

5) Mondelez (MDLZ) (formerly Kraft) spent $12 billion in SG&A last year. It spent 2x our electoral budget reminding people to buy Cheez Whiz and Oreos.

Is the electoral budget really a waste? I could argue that, compared with the money we spend marketing completely trivial items in our daily life, we in fact far underspend the amount we should to determine the leader of the free world.

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