On September 30th, the United States Congress sent a bill to President Biden's desk to avoid a government shutdown, at least until December 3rd. In the past, when the government has shut down or come close to a shutdown, similar to what just happened, we have seen market turmoil caused by the uncertainty surrounding the situation. However, even with that uncertainty removed temporarily until December 3rd, the markets may not have much breathing room since lawmakers still need to raise or suspend the debt ceiling before October 18th.
If the politicians in Washington can't agree on the debt ceiling, the U.S. could default on U.S. debt, something that most market participants believe would be "disastrous." However, the United States has never in its history defaulted on government debt. So, we honestly do not know what would happen if it were to happen. But, since U.S. Treasury bonds are widely considered "zero" risk and used as a benchmark or starting point to determine the risk of other alternative investment options if the government did indeed default, it would send shock waves throughout the market as other assets would need to be repriced based on their risk level when compared to U.S. Treasury bonds.
The uncertainty which would follow and potentially dramatic rise in interest rates across the board could and very likely would send the U.S. economy into a tailspin with the stock market falling and potentially a rise in unemployment. Some even believe that government spending in the forms of social security payments and bills owed to contractors would be suspended for a period of time while the U.S. Treasury determines what to pay and what not to pay. This would obviously hurt the overall economy as potentially millions of Americans would not receive social security checks and or paychecks if they work for a government contractor. Continue reading "U.S. Default Could Be A Disaster" →
U.S. stocks generally remain on bullish trends in all time frames. Further, the Debt Ceiling (and Government shutdown) theater seems to be playing out in the usual way that these events play out; the stock market has been correcting in an orderly way and seems to be waiting for an inevitable compromise between the White House and Republican leaders. This of course would spur a next leg up if the usual script plays out. That is how it looks, with a traditional bull catalyst (heavy media rotation of an Armageddon-like political event) in play.
Yet there is a negative in play that actually matters, as corporate forward profit guidance is degenerating. Or is it really a negative? Graph from Sentimentrader.com: Continue reading "U.S. Stock Market, Profits & Policy" →
Hello traders everywhere! Adam Hewison here, President of INO.com and Co-creator of MarketClub, with your mid-day market update for the last day of the month and quarter, Monday the 30th of September.
It's hard to know where to begin, so let's begin at the beginning. I think we should throw all the Republicans and Democrats out of office - they are absolutely not helping America move forward and get back on its feet again.
What is happening now in Washington is a childish squabble between two completely different ideologies without any grown ups in the room.
I believe that both parties have lost sight of the big picture, and that's making America strong economically. That means creating jobs, putting people back to work and to live within our means. If we can't afford it, we can't afford it - end of story.
These simple concepts seem to be beyond the grasp of the two parties and the last thing on either parties mind. It's all about, whats in it for me, and I want to keep my position of power and job come [email protected] or high water. Continue reading "Government Shutdown Imminent - Here's My Take" →
Today the House will vote on a short-term government funding bill that will include a provision to defund Obamacare. Of course, this provision will be opposed by Senate Democrats and President Obama.
If they can't work out a compromise, many functions of the federal government will be shut down indefinitely on Oct. 1st. Federal Reserve Chairman, Ben Bernanke, noted that "a government shutdown and, perhaps even more so, a failure to raise the debt limit could have very serious consequences for the financial markets and for the economy."
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The INO.com Team