Despite frantic last minute negotiations in the Senate, time has run out and we are going to go over the fiscal cliff. For at least a few hours, we will have the largest tax hike in history, but the good news is that the market believes that a deal is very close and likely to be put into retroactive effect in a few days.
The market started the day nervously as the confidence level in politicians is understandably quite low, but then gained momentum as the outline of a deal became clear. In addition, we had one of the worst holiday periods in quite some time so market players were happy to mark up things into the close. It was the first time ever that the Nasdaq closed up more than 2% on the last trading day of the year.
With a fiscal-cliff deal finally out of the way, the big question for the new year will be whether it is smooth sailing. The major complaint lately has been that this issue has caused great uncertainty and driven many people to the sidelines. There is still going to be plenty of uncertainty, especially as we still have the debt ceiling coming up soon, but it does enable us to focus finally on other matters.
One of the difficulties is that we have to deal with major macroeconomic issues as well as the usual end-of-year games. Individual stocks bounced around randomly while traders focused on other market drivers. Hopefully, that will change quickly as we move into the new year.
I want to wish everyone a healthy and happy new year. I hope you'll work with me to make 2013 the best year ever. We can do it if we stay focused and work hard. I'll see you on Wednesday.