"When you come to a fork in the road, take it!"
-Yogi Berra

Which way from here? This is a common topic of conversation in today’s market and arguments can be made for every point of view. So let’s take a look at what we do know.

The USA

No matter who you would prefer to win the presidential election, the good news is that we will have an answer when we wake up on November 7th. Either way, we will have to focus on the ability of congress to address the “fiscal cliff”. If the “fiscal cliff” is not avoided we do know the following are scheduled to occur on January 1, 2013:

1. Income Tax Rates Will Rise for Everyone – the lowest tax bracket will go from 10% to 15% and highest will go from 35% to 39.6%
2. 3.8% Surtax on Investment Income on individuals with an adjusted gross income (AGI) of $200k+ or couples with an AGI of $250k+
3. The patch on the Alternative Minimum Tax (AMT) will expire. In 2011, an estimated 4 million American tax payers were subject to the AMT. If this is not addressed, an estimated 30 million American tax payers will be subject to the AMT.
4. Marriage Penalty Relief Expires – Low to middle income two-earner couples will owe more taxes than if they were single making the same amount
5. Child Tax Credit Decreases from $1000 per child to $500 per child

For the first time since January of 2009, the US unemployment rate has declined under 8% to 7.8%. Unfortunately, part time employment was the majority of the job creation figure. The good news is we are having positive job growth. The bad news it is not growing fast enough.

Abroad

China

1. It is being predicted that Vice President Xi Jinping is going to succeed President Hu Jintao
2. The economy has been contracting, partly due to weak demand from Europe

Eurozone

1. Greece continues to have issues. Even the International Monetary Fund has refused to distribute more funds until additional assurances are in place.
2. Spain may become the first large European economy to request aid.

Middle East

1. There is growing hostility between Turkey and Syria
2. Iran is the first Middle Eastern country to experience hyperinflation. Since sanctions on Iran were enacted in July 2010, the rial has depreciated approximately 71%.

My Beliefs:

We may experience some short-term volatility in the US markets. Some investors may sell positions during the 4th quarter in order to lock in current tax rates, not knowing where future tax rate may be. Likewise, I believe that congress will find a way to kick the “fiscal cliff” can down the road once again.

The Eurozone may experience a prolonged period of slow growth (with some recession mixed in). The European politicians, I feel, will restructure terms for Greece, and Spain will eventually request aid. The Middle East turmoil will continue thus effecting fuel prices globally.

Fear creates opportunities. Like great team, you need to have a thoughful game plan in place. Do you have a plan to be opportunistic? To quote Yogi Berra once again, "If you don't know where you're going, you might not get there."