The US could stage a powerful recovery
With banks recapitalised and an adjustment in the housing market, the economy has stabilised

Reduction in fiscal policy uncertainty will be supportive of growth in H2 2013

Deleveraging is well underway

The US has been the fastest to reduce total leverage (public, financial, corporate and household)

Housing sector now an upside risk

Housing inventories at lowest since 2002

Home prices have bottomed

Consumer spending remains resilient

Household balance sheets improving thanks to deleveraging and higher house / equity prices

Labour market recovery supports spending

Manufacturing revival driven by cheap energy costs due to shale oil and gas boom

US shale to give chemicals and manufacturing sectors competitive advantage

Eoin Treacy's view The failure of the Republican's plan B last night has dampened stock market expectations for a continuance of the end of year rally and there remains a great deal of uncertainty about just what is going to happen with regard to the fiscal cliff.

The S&P found support in the region of the 200-day MA from mid November and has held a progression of higher reaction lows since. While it pulled back rather sharply today, a break in this sequence, with a fall below 1410, would be required to check potential for further upside.

The outperformance of large cap sectors such as banking insurance, industrials, machinery, chemicals etc at this stage suggest that aside from short-term bearish factors, the medium-term outlook is quite positive.