Uh oh -- the fiscal cliff is in the spotlight, and markets are sinking. As of 2:40 p.m. EST, the Dow Jones Industrial Average (DJINDICES: ^DJI ) is off about 1.1%, the S&P 500 (SNPINDEX: ^GSPC ) is likewise down 1.1%, and the Nasdaq (NASDAQINDEX: ^IXIC ) has dropped 1.3%. The big news today is that House Republicans are balking at the so-called "plan B," a plan which would have raised taxes on top earners.
Today's news is especially notable because it halts -- for the moment -- elements of compromise which could have led to a deal that would avert the full level of spending cuts and tax increases that characterize the fiscal cliff. However, while markets are sinking today, there's a more notable story investors should be following: the overall lack of interest in the day-to-day news on the fiscal-cliff saga.
More worries, less market movement
I know that sounds absurd; almost every financial and news outlet has today's fiscal-cliff news front and center. Yet while the media's fascination with the phrase has led "fiscal cliff" to become a top trend in Google search, the markets have largely shrugged off any outsize reaction to negotiations between Congress and the president.
As colleague Morgan Housel wrote late last month, 2012 has been one of the least volatile years on record. He noted that since 1980, there have been an average of 65 days per year on which the Dow moved more than 1% in either direction. If today's market losses end up being greater than 1%, today will only be the 37th day this year on which the market has moved more than 1%.
In December, despite the daily parade of headlines trumpeting the impact of fiscal-cliff negotiations on the market, the Dow hadn't moved up or down more than 1% until today. The Dow had ridden a series of muted gains to a 2.2% rise during the month.
The return of the zen market?
The point is that we frequently cite the irrationality of the market and its overreaction to the news of the day. However, in relation to the press, the market has been downright zen about the fiscal-cliff saga thus far. Perhaps investors are just adjusting to the constant "doomsday" scenarios in the news. In 2003 we would see outsized reactions to economic news that warned of a mild recession. Today, market-moving news more often concerns the fiscal collapse of entire nations.
None of this is to say there aren't serious problems facing the world's financial order. However, it is interesting that in a year when the stakes of financial news stories reached such extreme levels, "markets gone wild" have largely disappeared.
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