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SPX Stats for Week After
In addition to this seasonality bias, there is something
occurring in the political arena that could have a negative impact
on the markets. The Republicans and Democrats are having a
political squabble over raising the debt ceiling. The US
government's approved budget expenditures will cause the national
debt to exceed the current debt ceiling on September 31.
I won't get into the hissy fit the two sides are having over
raising the ceiling. Suffice it to say that neither side seems
willing to budge. Like I said, the first deadline is September 31.
If the debt ceiling is not raised by then, the government will shut
down. The Treasury would be able to juggle the books for another
three to four weeks in order to service the country's debt
obligations. After that, we would go into default as a nation.
Default is the worst-case scenario. The repercussions of such an
event would be, um, extremely not good and would extend globally.
Nobody wants this to happen, yet this political game of chicken
means it is a possibility. And when something really bad is a
possibility, it creates uncertainty. Markets do not like
This has happened before, but the closest we got to default was
in 2011. In that default scare, the deadline when the Treasury
would run out of ways to juggle the books was August 2. We were two
days from that when Congress finally raised the debt ceiling on
I have no idea what will happen this time. We are estimated to
be about 5 weeks away from default. This could all go away if there
is a deal struck this week or some other solution emerges, such as
the bill to raise the ceiling being passed as part of budget
reconciliation. That just doesn't look likely today. Maybe it will
With all that said, here is a chart of $SPX in the year 2011.
Note what happened as the debt crisis worsened in July. It doesn't
mean it will happen again. It's just a reference point of what
happen the longer the current stalemate lasts.
Thanks for sharing...along with the FOMC next week this is
certainly something to monitor
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