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VIX, the S&P 500 Volatility Index, also known as the “fear index,” fell 3.56% on Friday, and VIX ETNs also declined with iPath S&P 500 Short Term Futures ETN (NYSEARCA:VXX) losing 2% and VelocityShares Daily 2X VIX Short Term ETN (NYSEARCA:TVIX) dropping 3.8%.
March 1st marches closer with its $1.2 Trillion in automatic government spending cuts to both domestic and social programs over the next ten years if Congress and the White House can’t come up with a compromise solution to avoid it.
President Obama has been campaigning for a package of more taxes along with spending cuts, while Republicans are digging in for no more tax increases and just spending cuts to take place during this round of negotiations. Many analysts say that the magnitude of these cuts could trigger another recession, which could already be underway with the initial Q4 GDP printing a -0.1% reading.
Of course we’ve been here before, just remember the New Year Eve 11th hour settlement of “Fiscal Cliff: Part 1,” and both sides now seem to be no closer to agreement or compromise than they were in the summer of 2011 or last New Year’s Eve.
As the clock ticks, we can expect markets to get more nervous as people wonder if yet another 11th hour rabbit can be pulled out of the hat or if the politicians will once again defer judgement day yet for another day…
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