What does Wall Street know that Washington lawmakers fail to see?

The Hill

Monday, November 19, 2012

Wall Street is signaling confidence that lawmakers will strike a deal to avoid the “fiscal cliff,” baffling Washington insiders, who see less reason for optimism.

Stocks began to make a comeback Friday after President Obama and congressional leaders suggested that talks on the cliff’s spending cuts and tax increases were off to an auspicious start.

The Dow Jones Industrial Average continued the rally on Monday, rising 207 points and ending the day up more than 300 points since Friday’s meeting at the White House. The S&P 500 edged up 27 points…

Dan Alpert, a managing partner at Westwood Capital, suggested that markets were just now catching up with the reality that the president and Democrats have the upper hand in fiscal-cliff negotiations, making a deal more likely.

“The market woke up on Friday to the reality that Obama had won, and that the country had voiced a strong opinion on their desire not to see the Republican agenda go forward,” Alpert told The Hill. “One thing that financial markets and the industry and traders are acutely aware of is relative advantage.”

That assessment left Washington’s legislative veterans scratching their heads.

“This proves once again that equity markets really and truly do not understand Washington, D.C.,” said former Senate Republican budget staffer Steve Bell, a former managing director of Salomon Brothers who is now at the Bipartisan Policy Center.

“They are singing ‘Kumbaya’ in public. That is what they always do,” said Bell.

He said the next step in the Washington dance is for leaders to go back to their caucuses with details.

“The more detail, the more people drop off,” Bell said. “I don’t know that there is a deal to get a majority of the House Republican caucus.”

2012-11-19 00:00:00
The Hill