Photo: Contributed - Aaron Vincent Elkaim / THE CANADIAN PRESS

A man walks past a building in Toronto that used to house the Toronto Stock Exchange on Thursday, August 18 2011.

The looming U.S. fiscal cliff will weigh on markets again this week amid uncertainty that politicians can come together to defuse a potential crisis that threatens to send the U.S. into recession and derail a fragile global economic recovery.

"If there is no indication that a compromise is going to be reached, and that some type of resolution is going to be reached, equity markets as we are witnessing, will pass verdict," said Andrew Pyle, investment adviser at ScotiaMcLeod in Peterborough, Ont.

Investors will also be anxious to see if shoppers' confidence has been shaken as the American retail sector launches the start of the holiday shopping season with many stores opening their doors Thanksgiving night on Thursday.

The TSX has tumbled 3.9 per cent since the election Nov. 6 as worries about a sudden slowing of economic growth would be bad news for a resource heavy market like Toronto's, since a lessening of demand for oil and metals would put pressure on mining and energy stocks.

The Dow industrial average has fallen five per cent as investors worry about higher dividend and capital gains taxes.

The election left the Washington status quo largely in effect, the Democrats control the White House and Senate while Republicans continue to control the House of Representatives.

The outcome left traders lacking confidence that lawmakers can agree on a budget deficit cutting compromise and defuse the expiration of Bush-era tax cuts and the automatic imposition of huge spending cuts. Many economists believe the combination would send the U.S. back into recession.

There was some comfort at the end of the week as congressional leaders expressed confidence a deal could be reached following a Friday meeting with president Barack Obama.

And while many think that American politicians will get a compromise together out of sheer self-survival instincts, it's not surprising that investors aren't waiting around until Dec. 31 to protect themselves, particularly in the U.S. where much higher dividend and capital gains tax hikes are a real possibility.

On the economic front, traders will look to the September reading on Canadian retail sales. Economists looked for Statistics Canada to report sales rose 0.5 per cent during the month following a 0.3 per cent rise in August.

In the U.S., traders hope to see continued signs of an improving housing sector amid lower levels of foreclosures and modest price increases.

Housing starts for October are reckoned to come in at an annualized rate of 840,000, down from 872,000 in September.