‘Fiscal Cliff’ Is Key Phrase After Obama Win: Chart of the Day

News stories show record interest in the impending U.S. budget wranglings following the re-election of President Barack Obama last week.

The CHART OF THE DAY shows that articles mentioning the phrase “fiscal cliff” surged last week, according to data compiled by Bloomberg. Obama won a second four-year term as U.S. president on Nov. 6.

“Now that the election’s out of the way, everyone’s concerned political wrangling will stall a deal to avert the fiscal cliff,” said James Butterfill, who helps oversee about $64 billion as global equity strategist at Coutts & Co. in London. “Our stance is that this is a high risk, low probability event. Ultimately some of the elements of the fiscal cliff will kick in, but it won’t push the U.S. into recession.”

Congress will meet from tomorrow to try to agree on a deal that will stop $607 billion of automatic spending reductions and tax increases coming into force next year. The Congressional Budget Office has said the U.S. economy would slow by as much as 0.5 percent next year if Congress fails to keep the increases from taking effect.

The Dow Jones Industrial Average sank 2.4 percent the day after the election, its biggest decline in almost a year. The Chicago Board Options Exchange Volatility Index, the gauge known as the VIX that tracks expectations for U.S. stock swings, jumped to its highest level since July.

“While markets may price some wild scenarios between now and the end of the year, leading to a lot of volatility, the outcome will be positive,” Butterfill said. “No politician wants to be responsible for sending the U.S. into recession.”

To contact the reporters on this story: Alexis Xydias in London at Axydias@Bloomberg.net; Cecile Vannucci in Amsterdam at cvannucci1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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