The US Fiscal Cliff
Everyone knows what a cliff is – it is a dangerous place at the edge of the mountain where a fall results in death. How about the US fiscal cliff? Do you know what it is? According to Goh Eng Yeow, a senior correspondent with SPH, the US economy will be hit hard if US law-makers fail to reach a deal for budget-deficit reduction by the end of the year. Whoever the victor for the US presidential election will be, the task of landing a deal lies in his hands. If no deal is reached, about US$600 billion of automatic tax rises and spending cuts will take effect and cause thousands of public sector jobs to be lost. This would cause a major contraction in the US economy and dip the US back to recession.
As we all know, the property market tracks the stock market. This can be seen in the diagram showing the graph for PPI (Property Price Index) against the STI (Straits Times Index) and HDB Index.
If you want to be a prudent investor in real estate, make sure you track the global stock market or at least the STI which tracks the US stock market.