With the debt ceiling debate looming, the question that has the market on its toes is whether an agreement will be reached or if the government will shut down.
Personally, I don’t see a government shutdown happening. I believe that Congress and the President will come up with a plan in the eleventh hour and the debt ceiling will end up being raised. Here’s why:
The market as it stands has been doing very well; we’ve had a record year with the S&P, NASDAQ, and the Dow. The powers that be in Washington are very concerned about stalling out or “spooking” the momentum that we’ve had, so I have confidence they’ll do what is necessary and raise the debt ceiling again.
However, the truth is that the can just can’t continue to be kicked down the road. We’re in too tenuous a situation and sequestration would create a bad domino effect. In fact, I don’t believe that sequestration is even an option.
It’s widely understood that if the Federal Reserve doesn’t begin tapering its quantitative easing (QE) program, this means that the economy is weaker. A weak economy indicates that the consumer is stalling out, which can lead to a retail stall, and the cycle begins all over again.
If sequestration hits, areas hurt the most are going to be spending on public works: programs related to employment, healthcare, and education.
To hear more on my thoughts on the debt ceiling and what I expect to happen if it is not raised, click here.