Maria Bartiromo - A Crisis of Confidence

August 23, 2011

In This Week’s Brief
•Looking for Growth
•Maria’s Most Popular
•Poll: Housing Recovery on Horizon?

Overall, the biggest impediment in the U.S still points back to a crisis in confidence that investors and corporate have regarding Washington’s leadership. The view remains that as long as plans — or the lack thereof — to deal with fiscal problems are murky, the economic outlook also remains murky, and no one is willing to make long-term commitments of capital.

We’ve talked before about the lingering effects from the wrangling over the debt ceiling. The markets stalled and the economy stalled while the politicians debated. And by the end, the first month of the third quarter had passed without any significant or positive movement from Wall Street or Pennsylvania Avenue.

Many believe the politicians have essentially kicked the can down the road another quarter, and now investors will be hanging on third-quarter earnings reports more dearly than they did second-quarter numbers. This continues to keep the traders running the markets and their fluctuations, not investors that are having a hard time reading the fundamentals.

Here’s another example: I recently read a report on insider buying that showed an uptick in buying — signifying that insiders thought the sell-off had run its course and were investing in their oversold stocks. But then insider buying dried up again, so insiders may have tabled their investment plans in expectation of more bumpiness.

The growing concern now among many of the people I talk to is that corporate earnings, which have been the shining star in the economic storm, may be under pressure. Since 2008, large companies have become lean and mean and have managed to find ways to operate profitably in the current challenging conditions. Investors are now concerned that if that dynamic changes, the U.S. economy may be headed down a harder road.

Bottom line: Until Washington gets its act together and provides some real direction on fiscal policy and the economy, the markets will find a lot of reasons to remain cautious. Businesses and consumers can adapt when they know what they’re dealing with, so we’ll watch what happens in the coming weeks and months as the bipartisan “super committee” in Congress attempts to come up with a fiscal plan.