Biden caves to some Republican demands - 20% odds. ![]() In this scenario, there would be no change to the outlook for economic growth in 2023. In this scenario, a debt default would be fully averted thanks to the Republicans giving up on its spending cut demands at the last minute. ![]() The note referenced what happened in 2011 as a barometer for what's possible this time around, in which the S&P 500 sank nearly 20% over a period of a few months because the US lost its AAA rating from Standard and Poor's due to the political brinkmanship that was sparked by a debt ceiling crisis.ΔΆ. It runs on the trust that politicians understand that the potential consequences of a default are too dire, including wreaking havoc on the global financial system and causing a recession in the US and possibly the global economy," NDR explained. "Market participants have been conditioned over the years to expect that any debt ceiling impasse would be resolved in time to avoid a default, even if it comes down to the wire. While the ongoing US debt ceiling showdown in Congress is nothing new for investors, as the debt limit has been raised year after year with a typical show of political theater, it could have grave implications if the crisis isn't ultimately solved this time around. The latest debt ceiling showdown appears to be extraordinary as no party is in full control of Congress, and that could lead to disastrous outcome for the US economy, according to a Wednesday note from Ned Davis Research.
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