Cause and Effect: Government Increasing Volatility in the Markets
The budget debate and government shutdown has increased volatility in the markets over the past week. We don’t expect any significant economic impact from a temporary closure of non-essential government offices or programs. We are more concerned about the U.S. hitting its debt ceiling of $16.7 trillion – the statutory limit on the amount of debt our country is able to issue – in the latter part of October. If Congress and the President cannot come to an agreement to increase the debt ceiling, then the U.S. government would technically default on its debt. This has never happened before and could be very disruptive to the global financial system, our economic recovery and our nation’s financial reputation. Standard & Poor’s downgraded the credit rating of the U.S. in August 2011 as a similar debt ceiling debate deteriorated into partisan bickering. We are hopeful that does not occur again, but will be ever-watchful as we manage investment portfolios through this uncertain time period.
With all eyes on Washington, we believe these comments from James Swanson, Chief Investment Strategist for MFS Investment Management, help put today’s issues into perspective. http://ow.ly/pr4iw
Author: Chad Sander (Bio)
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