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‘Fiscal cliff’: Will Wall Street light a fire under Congress?

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Pete Davis of Davis Capital Investment Ideas, who advises many Wall Street clients about Congress’s actions, says many of his clients think as Mr. Kotok does – that Congress will act early in 2013.

However, “I keep telling them that is not my view,” he says. “They will reach agreement, but not before a fair amount of damage.”

Still, some on Wall Street think Congress doesn’t have to act right away.

“It’s not like we’re going to be plunging off the top of Niagara Falls and into the river in one day,” explains Fred Dickson, chief investment strategist at D.A. Davidson & Co. in Lake Oswego, Ore. “If there is no agreement in six or eight weeks, then you will see some serious consequences.”

With no deal, the expectation on Wall Street is that the economy will enter the new year at a very slow pace. In the first quarter of 2013, the economy will be growing at a 0.6 percent annual rate, estimates Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, N.C. That is barely above stall speed.

“If they don’t do anything, that could make the economy stumble and the chances for a recession increase,” Mr. Bullard says. “What Congress does will be the key determinant of the trajectory of growth for 2013.”

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