"The best scenario is mixing in some sort of long-term reform into this because then we can avoid this sort of cliff situation again," Stone said.

Even if Congress does nothing and lets all the tax hikes and spending cuts go into effect, it shouldn't hurt stocks that badly, given that higher taxes have not been shown to have a negative effect on stocks, said Brian Belski, the chief investment strategist at BMO Capital Markets.

"The markets are about the economic cycle, not taxes," Belski said. What's missing from the political debate is some sort of tax incentive for businesses to ramp up hiring and capital investment, he said, adding that such an incentive would add to tax coffers by creating more jobs. Such a plan, however, would have to cover three to five years to be useful for corporate planning purposes, he said.

"Overall, the key to this whole thing is to report a conclusion that is crystal clear, recognizable and understandable," Belski said.

Possible losers and winners

Energy companies stand out as being possible losers as some of their tax breaks could disappear, said LPL's Kleintop. By extension, higher energy costs would then be passed along to utilities, he said.

Another possible hit to utilities could be in the area of dividend taxes, given the sector's traditionally high dividend yield rate. If Congress doesn't act, the dividend tax rate is set to nearly triple from the current 15%.

That, however, may be an irrational market reaction to an expected higher dividend tax. The performance of dividend stocks isn't necessarily hampered by higher tax rates, said BMO's Belski, using data going back to 1962 on the top 20% of Standard & Poor’s 500 Index ($INX) dividend stocks ranked by yield.

Industrial stocks may see a boost if tax incentives are part of a fiscal cliff resolution, Belski said. Defense contractor stocks, however, remain under the microscope, according to the strategist, given the billions in automatic military spending cuts in play.

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