Business digs trench ahead of fiscal cliff

Traders work on the floor of the New York Stock Exchange November 7, 2012 in New York City.

The major stock indexes lost more than two percent last week -- the worst weekly losses since June. But by the end of the week, the markets calmed down a bit. According to Julia Coronado, Chief Economist with BNP Paribas, the apparent turnaround shows that Wall Street has settled down since last week's "knee-jerk reaction" to the elections. As businesses move forward, their attention has shifted to the possibility of broad spending cuts and tax increases set to take effect next January, known as the fiscal cliff. While companies are ensuring they have cash on hand to whether any market disruptions, Coronado says they are not taking many other drastic measures as they expect politicians to negotiate a way to avoid the fiscal cliff.
Need an easy explainer on the fiscal cliff? Marketplace senior producer Paddy Hirsch breaks it down with a Hollywood analogy in this Whiteboard video: The fiscal cliff explained (with help from Hollywood)

About the author

Jeff Horwich is the interim host of Marketplace Morning Report and a sometime-Marketplace reporter.

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