The fiscal cliff: The coming financial tsunami and what it means for investors

A financial triple-whammy is headed straight for U.S. taxpayers at the end of 2012 and the beginning of 2013. Known as the "fiscal cliff", this economic event is expected to happen after the expiration of the Bush-era tax cuts, the cessation of consumer stimulus plans like prolonged unemployment benefits and a 2-percent payroll tax cut, and the automatic spending cuts triggered by the Budget Control Act of 2011.

Today, we'll look at the big numbers behind the "fiscal cliff" and what it could herald for investors of U.S. stocks and bonds.

The sucker-punch to the economy starts with a tax hike of roughly $280 billion, which will increase levies on income, capital gains, dividends and other financial instruments. Those in the top-rate bracket will see a jump from 35 percent to 39.6 percent simply for their pretax income before any other taxes are administered. According to some economists, investors who rely on stock and bond markets for trading could see their income decrease between 15 percent and 30 percent per year.

Another $125 million will be chopped off from the economy when popular stimulus measures expire at the end of 2012. This number is a best-case scenario, as economists can only predict what the fallout in the U.S. consumer base will produce for retail sales and overall business strength, which in the long-term could hurt investors further. This effect will be compounded by the end of $40 million in unemployment benefits. $98 billion in domestic and military spending will also be cut from this year's national budget.

Cumulatively, the "fiscal cliff" could reduce U.S. GPD by 3.5 percent to 5 percent, which at current growth rates of about 2.5 percent per year could plunge the U.S. economy back into recession. While not certain, these simultaneous tax hikes and spending cuts could trigger an investor panic, which may cause stock markets to plunge.

There is still time for U.S. leaders to resolve this situation peacefully. However, it remains a possibility that some or all of these changes will take place, at least temporarily, an event that will surely roil markets worldwide. Investors who wish to avoid this potential financial nightmare should contact Great Wealth Strategies to learn about reliable and cost-effective asset protection measures.