Traders are optimistic about debt ceiling agreement; the strategist said it was an opportunity

Analysts are generally optimistic that the deal to raise the US debt ceiling will pass in a divided Congress.

Their comments came after US President Joe Biden and Speaker of the House Kevin McCarthy reached an agreement by the end of the week raised the debt ceiling to avoid the government’s first default.

In the midst of this turmoil, investors can find “market opportunity,” according to Stephen Pavlick, partner and head of policy at Renaissance Macro Research.

Negotiators agreed for some Republican requirements, such as stricter job requirements for low-income Americans.

The compromise also sees the debt ceiling suspended until January 1, 2025, pushing it through the 2024 presidential election. Spending will also largely remain unchanged in 2024, except for defense and former warriors, while spending for 2025 will increase by 1%.

Although agreement in principle has been reached between the two parties, it still needs congressional approval by both the House and Senate.

“I think it’s almost certain that it will pass,” said Jeremy Siegel, a finance professor at the Wharton School of the University of Pennsylvania. He said he had “little doubt that they won’t reach a deal… this will be a done deal and voted positively on Wednesday.”

He called the suspension of the debt limit until 2025 a “right decision” and said he had expected it to be delayed only for a year.

“I think they’ve decided that they want after the next election to increase that debt limit, and there’s no other debate that can distract the American public from the key issues that divide the land.” water.”

Still, Some Republican lawmakers criticized the deal after the announcementwhile other hardliners threatened to sink the deal.

Pavlick predicts that McCarthy has the support of a “republican majority” in the House, “but that majority could change dramatically.”

Talking to”Asian Squawk Box” on Monday, Pavlick noted that about 75 hardline Republicans would likely oppose the deal, pointing to the ultra-conservative House Liberal Group, as well as conservative Democrats. hard line.

As a result, with Republicans holding a slim majority of 222-213 in the House, Pavlick said he thinks McCarthy will have to rely on moderate Democrats to get the bill through.

“So it’s really going to be up to President Biden to get 75 more dovish votes to make sure it gets enough votes to get it through the House. I think if that’s the case, it’s going to pass the Senate. hospital can be secured.”

For Pavlick, the deal was a “Republican victory.”

“The fact that there was a negotiation, in itself, is a win for the Republicans,” he said, noting that Biden had said he would not negotiate a debt limit earlier this year, but did “forced to do this.”

He said the Democrats could have “ignored this when they took control of Congress late last year, two years ago. And they chose not to do so.”

David Roche, president and global strategist at Independent Strategy, calls it a “democratic victory.”

He hopes the deal will pass the House with Democratic support, though, like Pavlick, he said right-wing Republicans will likely vote against it.

Roche said that when the bill allows borrowing through 2024, the country will likely put the issue on hold until it reappears in 2025.