Economic Growth Trumping Fiscal Cliff Stalemate

Most of the financial headlines right now are about fiscal cliff talks hitting yet another snag. And yet…stocks were up half a percent today.

Huh? How can people still be buying stocks when we’re this close to the cliff, people might be asking.

The answer, at least for one day, appears to be growth – as in GDP growth.

The U.S. economy grew 3.1% in the third quarter, outpacing the 2.7% growth economists were expecting and the meager 1% rate the commerce department forecast two months ago.

The 3.1% growth rate is the fastest since late last year. It shows that the U.S. economy is still making strides in its recovery despite all the fiscal cliff fears.

That could all change in the next 10 days, of course. As I mentioned earlier in the week, fear over the debt-ceiling default on August 1, 2011 didn’t take hold of the market until about 10 days before the deadline.

With the two sides seemingly no closer to a deal after the recent round of political posturing by both President Obama and John Boehner, we may be right on the brink of another major pullback – especially now that stocks are close to five-year highs.

For one day, however, investor encouragement over the country’s GDP growth trumped any burgeoning fiscal-cliff fear. Enjoy it while you can. As the December 31 deadline draws dangerously close, don’t expect that optimism to last – at least not while Washington politicians continue to drag their feet.

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