The banners may be flying on Wall Street but the US faces a rocky ride over spending cuts before regaining its feet. Photo: Getty Images

THE most common question I get asked is how the world will pan out once we get through the current mess? Futurism is a dubious occupation but a task we all like to dabble in. When it comes to sharemarkets, the best approach is to go region-by-region identifying the key dynamics.

The United States is still the largest and most critical global sharemarket.

There can be no new bull market without America leading the charge and I am confident it will find its feet again and retain world leadership.

Advertisement: Story continues below

In the short term, the US is in for a rocky ride, dealing with the looming $750 billion reduction in government stimulus. Coined the ”fiscal cliff”, this involves the end to a series of tax breaks and the start of savage spending cuts that are due to kick in early next year. Economists forecast this could deduct a staggering 3 to 5 per cent off economic growth.

Avoiding this would seem difficult given the political divide and the approaching presidential election.

If nothing is resolved by August, this could trigger another wave of selling on the sharemarket.

No doubt the Federal Reserve and its captain Ben Bernanke will be ready to counter with more cash manufacturing, all making for a bumpy ride through until December.

Beyond 2012, it is easier to build a more bullish case for the US.

Read more from the original source: