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For well over a year now, investors have dreaded the US’s looming “fiscal cliff”—the combination of federal budget cuts and tax increases scheduled to take effect on January 1, 2013. Should America’s gridlocked Congress not agree on a work around, some economists, credit ratings agencies and government forecasters believe the US economy could slow significantly or even enter recession. This paper looks at the likelihood the United States falls off the fiscal cliff.

President Obama will head into his second term in January facing a divided Congress that looks a lot like the Congress of the last two years of his first term – with the Democrats controlling the Senate and conservative Republicans solidly controlling the House of Representatives.

While political pundits work overtime to draw profound conclusions from Tuesday’s election results, the implications for the financial markets seem less than momentous. Election night was clearly much better for Democrats than Republicans, but this was a status quo outcome. Until the 2014 mid-term elections, the players will be President Obama, a GOP House of Representatives and a Democratic Senate—the same mix as the last two years. This begs the question, “Will anything be different?”

The world’s largest developed economies continue to experience modest and volatile growth as they work off excess debt accumulated over the previous decades. Global growth is unlikely to come in a straight line, due to the instability caused by excess debt and the inconsistency and cyclicality of governmental policy response. In fact, in the near-term, global economic growth appears to again be waning, creating the third annual growth scare since 2009. This has prompted further monetary action from central banks. Will it be effective?

The fourth quarter 2012 issue of Global Foresight features a discussion of the recent QE3 (quantitative easing) announcement by Federal Reserve Chairman Ben Bernanke and the related inflation and market implications, along with a discussion of the current geopolitical overlay.

With the International Monetary Fund and most analysts ratcheting down global growth forecasts, no end in sight for Europe’s fiscal and financial challenges, and a looming fiscal cliff in the United States, there is considerable hope that China, the world’s second largest economy, can remain an engine of global growth. Only Chinese growth his slowing rapidly. Is it time to revise expectations?

This paper looks at the possibility of an upturn in housing and the headwinds most likely to impede a robust recovery.

Pension plan sponsors face significant challenges.  Retirement obligations continue to increase, and the two major equity market set-backs in 2000 and 2008 have produced widening funding gaps.  So what does the future hold?  Will their plans be able to reliably achieve their stated return objectives?  Unfortunately for plans relying solely on traditional equities and fixed income, the prospects look grim.  Our analysis suggest these plans will likely experience a 2% shortfall per annum over the next 7-10 years.

Current U.S. fiscal policy, if not modified before year-end, is on track to deliver a $600 billion economic headwind in 2013 (the equivalent of 4 percent of U.S. GDP), while the 2012 presidential and congressional elections add another layer of uncertainty to an already complex and politically challenged situation.

The upcoming election is as much about how we address fiscal issues as it is about the pace of the remedy; at the center is the debate over taxes and the size of government.