"It's businesses that are losing confidence" because of the uncertainty, Luschini said. "We think if we get past the fiscal cliff, we might see a boost in business confidence, which will lead to some pent-up spending, which could lead to hiring, which could be the surprise of 2013.
"That could allow us to get up to 3 percent economic growth instead of languishing around 2 percent. That's the big if.
"The fiscal cliff is going to have some impact, even if it gets whittled down," he predicted. "There will inevitably be some combination of spending cuts and taxes. We think the impact on the economy will be more like a 1.5 percent hit. Meanwhile the question is when it will be dealt with."
Now there is hope that the rhetoric about compromise is going to be turned to action but those who remain negative point to the federal government's past track record, Luschini said.
"The last time we hit a crisis, with the debt ceiling debate, the rating agencies downgraded the United States and the (stock) market sold off 400 points," he recalled. Already Moody's and Fitch, two independent rating agencies, have said they need to see a federal government financial plan in place or they may lower the nation's credit rating another notch.
With inflation running at about 2 percent and the Federal Reserve determined to keep interest rates low, investors with savings accounts and certificates of deposit "will have to look to the right of the decimal point to see what the yield is," Luschini said.
It is inevitable that interest rates will eventually go up and bonds will go down, he said.
As for equity markets, "corporate profitability is at an all-time high; the market is trading at 13 times earnings, companies have pristine balance sheets and they're holding $2 trillion in cash," he said. "It appears to us, on balance, that equities offer a far better return scenario. We favor equities over bonds and cash, if an investor is agnostic on risk."
Luschini said his firm is recommending that its clients "pivot their portfolios from U.S.-based high-quality companies to non-U.S.-based companies, particularly in Europe." He reminded listeners, "big European companies don't just sell into the European market, they sell into world markets."
For more than two years Janney Montgomery Scott has been recommending clients invest in dividend-paying stocks because they help stabilize a portfolio and generate cash flow. Dividend-paying stocks "are good for income-seekers and those looking for some growth," Luschini said. "That theme works in U.S. equities and with international companies."
Luschini's monthly investment insights are posted on Raab Wealth Advisors' website at www.raabwealthadvisors.com.
Contact writer George Hohmann at busin...@dailymail.com or 304-348-4836.