So much for the theory that sequestration would scare investors off.
The March 1 sequestration deadline has come and gone without a deal from Congress to avoid the $83 billion in spending cuts that were scheduled to begin last Friday. So far, investors seem completely unfazed.
Contrary to what some analysts had forecast, there has been no mass sell-off in the absence of a sequestration compromise. In fact, just the opposite has happened.
The Dow Jones Industrial Average is up 1.3% since March 1, blowing past its previous all-time high of 14,198 early this morning. The index is well on its way to closing above 14,200 for the first time ever.
The S&P 500 also hit a new high today, eclipsing the 1,540 mark for the first time in the large-cap index’s history.
This is a far cry from what happened to stocks leading up to the fiscal cliff and debt ceiling deadlines. In those cases, stocks plummeted in the week prior to the deadlines.
This time there was no panic, no mass sell-off before or after the March 1 deadline. Perhaps investors simply aren’t as concerned with across-the-board spending cuts as they were with the tax increases the fiscal cliff and debt defaults promised – before each was averted at the 11th hour.
Or maybe they’ve just learned to tune some of these macro fiscal issues out and focus simply on investing in good companies.
Either way, sequestration hasn’t been the catastrophic event some analysts feared.