2023-05-15 22:32:12
The debt ceiling is another hurdle
“There is little conviction on either side as the market continues to digest earnings reports, a slew of economic data, and finger pointing in Washington regarding debt ceiling discussions.
What are the US Treasury’s options when cash runs out?
For Chris Larkin of Morgan Stanley’s E*Trade, it’s fair to ask whether the drop in stock volatility indicates the market is very complacent about what’s going on – especially after the S&P The Poor’s 500 has its narrowest weekly range outside of holidays since August 2021.
“A debt default may not be the most likely scenario, but a prolonged discussion or unexpected development could cause higher volatility,” he noted.
Marko Kolanovic of JPMorgan Chase joined a chorus of Wall Street strategists on Monday in warning that the US debt ceiling crisis is another hurdle threatening the outlook for equity markets.
Mike Wilson of Morgan Stanley issued a similar warning about the debt ceiling deadline, noting that the bank’s clients said they were unlikely to solve the problem without some volatility in the near term. Meanwhile, Jean Boivin and Wei Li of the BlackRock Investment Institute said they expect the potential standoff over debt to lead to renewed volatility.
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