U.S. markets continue a prolonged downturn on Thursday. Each major index was down over 1.5 percent over the last five trading days as market participants either sell or sit on their hands. The progress of the fiscal cliff discussions in Washington is effectively a mystery to observers, with every round of optimism meeting an equal and opposite round of pessimism.
As a result of the lack of action in Washington, CEOs are sitting on over $3.5 trillion in cash and liquid assets, a record amount of money that may as well be hidden in America’s corporate mattress. No one wants to be the company that played too aggressively in 2012 and didn’t have a war chest big enough to weather whatever fiscal storm may brew in 2013.
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The two major domestic issues that now loom over the U.S. economy are the fiscal cliff and the approaching debt ceiling, which will both present themselves with the start of the new year if Congress fails to find a solution. The prospect of severe austerity is compounded by America’s continuing struggle with its legal borrowing limit, and the combination has all but thwarted participation in the market. Slowing growth in major developing economies such as China and the European debt crisis complete the shadowy picture of the global economy.
But despite all the doom and gloom, holiday spending may not be the only fourth-quarter economic fuel. Data compiled by Bloomberg shows that while total merger and acquisition activity for full fiscal year was 10 percent lower than 2011, about $691.9 billion in purchases were announced worldwide in the last period, the highest level since the third-quarter of 2008. Overall 2012 transactions reached $2.19 trillion…