Washington is unlikely to agree on anything, but the consensus everywhere is “day X,” when the Treasury Department can no longer pay government bills unless the debt ceiling is raised, won’t arrive any earlier than June 1 – and possibly not for next week. Good news for the market next week: no defaults, no credit bureau downgrades, no apocalypse. Negotiations continued between White House staff and Congress, leading to another meeting between President Joe Biden and congressional leaders before Biden leaves next Wednesday for the summit. G-7 summit in Tokyo. The bad news is that complacency is on the horizon in equities, as the CBOE Market Volatility Index (VIX) traded below 18 on Friday and has fallen nearly 22% in 2023. Expectations for future stock market volatility were reduced as bond yields fell in 2023, helping tech stock valuations, sustained US economic growth and first-quarter corporate profits. stable first. “Unfortunately, that only increases vulnerability to short-term shocks, including shocks,” wrote Christian Mueller-Glissmann, Goldman’s head of wealth allocation research in London. US debt ceiling and new financial stability concerns”. Bill Blain, chief market strategist at Shard Capital, also in London, assumes that “at some point something is going to go wrong” in the debt negotiations, “and after a little fuss, will there is a deal that leaves people still angry and upset, and the spikes IN [ short-term Treasury bill ] Worrying precedent in 2011 Recent history tells investors that stocks will be more volatile during a debt ceiling standstill. Similar deadlocks in 1996 and 2013 occurred between bull markets and were followed by fresh rallies, Nick Lentini, US equity strategist at Morgan Stanley, recently noted: The period that most worried Wall Street happened in 2011, when capital markets were already rocking like they are today. Lentini said 12% more in the two months following the resolution. In some respects, the stock slump around the debt cap crisis of 2011 was even worse than that. That year, “the S&P 500 peaked on its last trading day and fell 19.4% to its final low on October 3,” said Jeff Hirsch, editor of Stock Trader’s Almanac. Almost all of that decline came in three weeks at the height of the summer, when both Standard & Poor’s and Moody’s Investors Services reviewed the U.S. AAA credit rating, culminating in S&P downgrades. downgraded the U.S. level to AA+ in early August. Therefore, “the dispute over the current debt limit and comparison with 2011 remains a concern,” Hirsch said recently. “Market volatility is likely to pick up and stay high until a resolution is reached. We still see the market being range-bound. [so] The upside may be limited.” That’s also Goldman’s view, which tells investors that the stock is unlikely to make much progress because it’s so late in the business cycle. as inflation is normalizing, growth is also slowing, and Goldman central banks said this week that they are still tightening policy, which limits upside potential for risk assets. . Keeping the government bureaucracy running is crucial for America to get through the recession. Morgan Stanley economists suggest that “consumer spending could fall between 8% and 12% in a given month if [households] “In the meantime, however, there is little reaction to the debt negotiations until June 1 closer, when there is little reaction to the debt talks,” said Rob Haworth, senior investment strategist for the US. “The special measures of the Ministry of Finance are almost exhausted.” Asset management banking in Seattle. on Thursday, with investors listening to management, as consumer spending still makes up 68.5% of the economy.Deutsche Bank estimates that retail sales April rose 0.7% month-on-month, according to market consensus. Credit Suisse was less optimistic, forecasting that April retail sales rose 0.6 percent, but excluding vehicles, unchanged. New York Fed President John Williams is scheduled to speak twice next week, while Fed Chairman Jerome Powell sits down to chat with former Fed chief Ben Bernanke at a central bank meeting in Washington. Washington next Friday. — Hakyung Kim, Fred Imbert and Michael Bloom of CNBC contributed to this report. Next Calendar Week Monday 8:30am: Empire State Index (May) Earnings: Catalent Tuesday 8:30am: Retail Sales (April) 9:15am: Industrial Production (April) ) 10 a.m.: Inventories in the business (March) 10 a.m.: NAHB Housing Market Index (May) 12:15 p.m.: NY Fed President John Williams speaks in front of University of the Virgin Islands Thu Income: Keysight Technologies, Home Depot Wed: 8:30 a.m.: Building Permits (April) 8:30 a.m.: Start of Home Construction (April) Income: Target, TJX Cos., Synopsys, Cisco Systems , Take-Two Interactive Thursday 8:30 a.m.: Initial jobless claims (week ending May 13) 8:30 a.m.: Philadelphia Fed Index (May) 9:05 a.m. : Fed Governor Philip Jefferson speaks on the economic outlook at the National Association of Insurance Commissioners (NAIC) in Washington, DC 10 a.m.: Existing Home Sales (April) Earnings: Bath & Body Works, Walmart, Applied Materials, Ross Stores, DXC Technology Friday 8:45 a.m.: NY Fed President Williams delivers keynote speech at the Thomas Laubach Research Conference in Washington, DC 11 a.m.: Fed Chairman Jerome Powell chats with Ben Bernanke, former Chairman of the Board of Governors of the Federal Reserve System, at the Thomas Laubach Research Conference, Washington, DC Income: Deere
