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There is a lot of talk in the press about the so-called fiscal cliff. Judging by the number of questions we are receiving on the issue, people are confused about what it means and concerned about its effects. Therefore this post will help explain the fiscal cliff and its possible effects on investors in Asia.
The term fiscal cliff is a media term coined to refer to the potentially devastating economic effects resulting from the changes in a number of laws which will come into effect at the beginning of 2013. It is widely expected that if a compromise is not reached among American politicians, the effect of law changes will result in tax increases and spending cuts in the US Federal Budget.
The changes are expected to lead to an overall increase in taxes which in turn will lead to an increase in government revenue by 19.63%. At the same time, cuts in federal spending, previously agreed as part of a debt ceiling deal, will fall by 0.25%. This will lead to a sharp drop in the US budget deficit, which has been dubbed the fiscal cliff.
The situation is expected to lead to a sharp break on the recent progress the US economy has made in coming out of the recession, plunging the economy into negative growth. However it might not happen – there are currently frantic efforts in Washington to try to modify the impact of the fiscal cliff, but negotiations are complicated and common ground is proving difficult to find.
If the US does slip back into recession, it will have knock-on effects around the globe where many countries, particularly in the developed world, are still struggling with no or low growth economies. The fear is that the fiscal cliff will cause a ripple effect that could see many more economies slip back into full blown recession.
For personal investors in Asia, this would mean more lean years when it comes to their investments. Bank deposits are likely to continue to provide risible returns and stock markets are likely to remain volatile; not ideal for those looking for a steady solid return on their savings. However for investors in Asia, Infinity does have an answer.
Our exclusive partnership with award winning portfolio manager, Bestinvest, allows people living in Asia access to exceptional investment management that can provide the returns they are looking for in the current difficult economic conditions. There are a range of portfolios to choose that suit every risk profile. So whether you want a cautious fund for steady, safe growth or are looking for something adventurous to maximise your potential returns, get in touch for a consultation with one of our professional advisers.
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