What the 'sequester' means for stocks

Stock markets have shrugged off the furore over the painful package of cuts in America, known as the 'sequester'. But are investors right to be so sanguine?

"The assumption was that not even Washington is dumb enough to do this", says Randall W Forsyth in Barron's. "Wrong." On 1 March, the "sequester" spending cuts worth $1.2trn over ten years kicked in in the US. The squeeze this year amounts to around $85bn.

The heavy-handed cuts will cover areas including defence, environmental protection, and education. Staff in many state agencies will be put on unpaid leave. The sequester is designed "to exact as much inconvenience and misery as possible for relatively minimal shrinkage" in the huge deficit.

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